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Shares in Alibaba, the e-commerce group founded by Jack Ma, fell sharply on Monday after Beijing publicly accused the company’s payments arm of regulatory flaws in its latest attack on one of China’s richest men.
The comments by Pan Gongsheng, deputy governor of the People’s Bank of China, were posted on the central bank’s website on Sunday and came as authorities increased pressure on Ma’s business empire.
Alibaba shares plunged as much as 7.3% in early trading in Hong Kong, reaching their lowest level since July. The PBoC reprimand overshadowed an Alibaba move on Monday to push its two-year share buyback program to $ 10 billion from $ 6 billion.
The company’s shares have fallen more than 25 percent, roughly $ 260 billion of Alibaba’s market capitalization, since late October, when Ma publicly criticized the country’s financial regulators and state banks. The personal fortune of Ma, once the richest person in China, has fallen from just under $ 62 billion to $ 49.3 billion, according to Bloomberg data.
$ 300 billion
Ant Group’s proposed minimum valuation before its frustrated IPO
Beijing halted a $ 37 billion IPO of Ant Group, Alibaba’s online financial unit, following Ma’s comments. That set off a cascade of public, state media and government criticism of the alleged monopolistic practices. of the two companies.
China’s market regulator announced last week that it would launch an antitrust investigation into Alibaba, while Ant confirmed that it had been called into a meeting with the PBoC and three other regulators.
Pan’s comments, released a day after PBoC and Ant representatives met in Beijing, have refocused investors’ attention on the financial services group. Ant had been trying to restructure his business in an attempt to relaunch his IPO next year.
However, Pan’s attack confirmed how daunting the task will be. It said Ant would have to “go back to its roots” as a payment service provider and “rectify” many of its most lucrative and fastest growing consumer credit and wealth management operations. Ant has started that process in recent weeks, but investors anticipate that it could affect the company’s valuation if it can return to the market.
“It will take at least 12 months for regulators to come up with new detailed rules for Ant to follow,” said Ji Shaofeng, a former official with China’s banking and insurance regulator. “Ant will not be able to complete the review of his business until the new regulations are available.”
Ant’s IPO would have been the largest in the world and would have valued the company at more than $ 300 billion.
Analysts are not sure if a restructuring will satisfy regulators or if Ant will have to sell or close some of its consumer credit operations. The latter have drawn fierce criticism from state banks who argue that Ant has benefited from looser regulatory oversight.
The parallel move against Alibaba, which is listed in Hong Kong and New York, has further raised the stakes for Ma, who established the group more than two decades ago in Hangzhou, the capital of eastern China’s Zhejiang province.
After the State Administration for Market Regulation revealed its investigation of Alibaba on December 24, Zhejiang officials confirmed that they had interviewed company staff and taken materials from the group’s headquarters.
Zheng Shanjie, the governor of Zhejiang, said on Friday that the investigation was not intended to usher in “winter” for online businesses, but to mark a new “starting point” for the development of the sector.
Additional reporting from Xinning Liu and Ryan McMorrow in Beijing
