On Monday, investors expressed confidence that the years-long regulatory investigation of Alibaba’s financial subsidiary, Ant Group, may be coming to a close, which led to a 3% surge in shares of Alibaba’s Hong Kong-listed company.
On Friday, Chinese authorities fined Ant Group 7.12 billion yuan ($985 million), perhaps putting an end to Beijing’s campaign against homegrown internet firms. The penalty follows the suspension of Ant Group’s initial public offering in late 2020 due to the company’s failure to comply with listing criteria. The parent firm of Ant Group, Alibaba, was hit with a $2.8 billion antitrust charge in 2021. Meituan, a major food delivery business, and Didi, a ride-hailing service, were both hit with hefty fines for breaking rules.
The majority of the unresolved problems relating to platform businesses’ financial operations, according to Chinese authorities, have been handled, and the domestic tech sector will now be subject to “normalized supervision.” The Chinese government may be loosening its grip over the local IT industry, according to conjecture sparked by this development.
Analysts advise that even if the Ant Group settlement is good news, authorities have also stressed the necessity for more extensive industry-wide controls to efficiently manage the whole sector. This means that the hope that regulatory scrutiny is coming to an end may be premature since the new rules may be just as strict.
The non-executive chairman of Partners Financial Holdings, Ronald Wan, voiced the opinion that future growth rates for both Ant Group and Alibaba would be considerably constrained. He believes that Ant Group in particular may function in China more like a state-owned bank.
Shawn Yang, managing director of Blue Lotus Research Institute, is still optimistic about Alibaba in the wake of the sentence levied on Ant Group despite these worries. Yang compares Ant Group to PayPal and suggests that the company’s worth may be greater than current projections. He points out that, given its similar status to PayPal, Bloomberg’s estimate of Ant Group at $22 billion to $57 billion is too low.
An share repurchase program recently disclosed by Ant Group valued the business at $78.53 billion, a considerable decrease from its failed 2020 IPO attempt valuation of $315 billion. The repurchase has sparked doubts about the company’s intentions for a prospective IPO in the near future since the buyback’s stated explanations would appear superfluous if an IPO were on the horizon.
Although the announcement was well received by Alibaba’s stock, experts and investors are nonetheless wary about the possible effects of more extensive restrictions and the future development possibilities of Alibaba and Ant Group. Alibaba has both possibilities and difficulties as it navigates the changing regulatory environment in China with the settlement of the regulatory overhang on Ant Group.