China ends probe of Ma-backed Ant with $984 million fine

Qilai Shen/Bloomberg

Chinese regulators imposed a 7.12 billion yuan ($984 million) fine on Ant Group, according to a statement from the central bank, wrapping more than two years of probes into the finance technology giant founded by billionaire Jack Ma.

The People's Bank of China said it imposed fines on Ant Group and its subsidiaries, including confiscation of illegal income, according to a statement on Friday. The sanctions were in response to violations of laws and regulations in areas including financial consumer protection, payment and settlement business and anti-money laundering obligation in the past years, the statement showed.

The move draws a line under the multi-year crackdown that torpedoed Ant's record initial public offering in 2020 and ensnared some of the nation's most powerful private firms in sectors from online education to gaming. It paves the way for Ant to revive growth and even eventually resurrect plans for an IPO. 

Ant Group said it has completed rectification required by China's financial regulators, according to a company statement.

Fines were also issued to a payment platform of Alibaba rival Tencent Holdings, as well as PICC Property & Casualty , Postal Savings Bank of China and Ping An Bank, given the problems found in previous law enforcement inspections, according to the statement. 

Most of the key problems in financial platform enterprises such as Ant Group and Tencent have been rectified, the statement said.

It's unclear why Tencent also received a fine. The WeChat operator's executives have stressed repeatedly since 2022 that their financial businesses are in full compliance with the law, and that they're in constant dialogue with Beijing.

A meaningful relaxation of curbs on Ant — one of the most high-profile casualties of President Xi Jinping's sweeping clampdown on the country's tech giants — would send a strong signal that policymakers are following through on recent pledges to support the industry. The Communist Party's evolving stance toward the private sector has become one of the most closely watched developments in global markets in recent years, with some observers even calling China's sprawling internet sector uninvestable.

Ant's bottom line has eroded since the days it was preparing for the world's largest IPO in 2020, while its affiliate Alibaba is in the process of splitting into six main businesses from cloud services to meal delivery and logistics. While investors initially cheered the potential creation of value, Alibaba's shares have come off their 2023 highs and have shed more than $600 billion of their value since the Ant episode began.

Shares of Alibaba rose 3.4% in Hong Kong after Reuters reported earlier China may impose a fine as soon as Friday.

"The market likes it because scrutiny looks likely to be over and the fine, though big in absolute terms, is very manageable for such a big company," said Vey-Sern Ling, managing director at Union Bancaire Privee, after the Reuters report. The levy is less than the 9.6 billion yuan profit that Ant generated in the December quarter. 

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Ant co-founder Jack Ma returned to China in early March after a prolonged period of traveling overseas. The government persuaded Ma to go back to the mainland as a means to showcase authorities' support for private entrepreneurs, Bloomberg News had reported. 

The move follows Ma's decision to cede control of Ant in January, holding about 6.2% voting rights after the change. Following that, the Communist Party chief of Hangzhou city praised Ant for abiding by the party's leadership, and required local government departments to solve problems raised by the fintech company. 

Ant said in January it has no plans for an IPO now and is focusing on its business. Still, the company's Chairman Eric Jing said in 2021 that it would eventually go public. 

More than two years ago, Chinese regulators abruptly halted Ant's would-be record IPO, sending shock waves across global capital markets. New rules have been slapped on the fintech giant, which has operations ranging from consumer lending and wealth management to online payments. 

The central bank ordered Ant to fold all financial units into a holding company. It also told the firm to open up its payments app to competitors and sever improper linking of payments with other products including its lending services. 

It could take longer than anticipated for Ant to resume an IPO. Companies can't list domestically on the country's so-called A-share market if they have had a change in control in the past three years — or in the past two years if listing on Shanghai's STAR market, which is geared toward new technology companies. For Hong Kong's stock exchange, this waiting period is one year. 

Ant's valuation will also look different if it were to go public again. While Ant fetched a valuation of $280 billion pre-IPO, the myriad regulations imposed over the past two-plus years mean it's now worth a fraction of that, as it's now more "fin" than "tech." 

Ant could also spin out some of the businesses such as blockchain technology, its database operation known as OceanBase and global services, people familiar have said. Those deliberations are preliminary and could be subject to change. 

Expectations of growth and margin are generally lower for banks than technology companies. Fidelity Investments, for example, cut its estimated valuation for Ant to $64 billion, from $235 billion just before the IPO was suspended.