China Tech giants: Jack Ma, the founder of Ant Group, will cede authority in a key overhaul.

Jack Ma, the founder of Ant Group, will relinquish control of the Chinese fintech giant as part of a restructuring intended to put an end to the regulatory onslaught that began soon after Ant Group’s enormous public market launch was derailed two years ago.

When Ant’s $37 billion IPO, which would have been the biggest in history, was abruptly postponed in November 2020, the financial technology company was forced to restructure, and rumors circulated that the Chinese billionaire would have to relinquish control.

Although some analysts have suggested that giving up control could allow the business to restart its IPO, the revisions made by the group on Saturday are likely to cause further delay because of listing restrictions.

Companies must wait three years to list on China’s domestic A-share market following a change in control. The wait is two years on Shanghai’s STAR market, which is modeled after the Nasdaq, and one year in Hong Kong.

Ma, a former English teacher, had more over 50% of the voting rights at Ant before the revisions, but calculations show that his share will now just be 6.2%.

According to Ant’s IPO prospectus submitted to the exchanges in 2020, Ma only owns a 10% interest in Ant, a subsidiary of e-commerce behemoth Alibaba Group Holding Ltd (9988.HK), but has exerted control over the company through affiliated entities.

According to the prospectus, Ma’s investment vehicle Hangzhou Yunbo had control over two more corporations that together own a 50.5% share in Ant.

Ma’s decision to give up control of Ant comes as the company is almost finished with a two-year regulatory-driven restructuring and is facing a fine of more than $1 billion from Chinese authorities.

The anticipated fine is a component of Beijing’s extensive and unprecedented crackdown on the nation’s technological giants over the previous two years, which has reduced their value by hundreds of billions of dollars and reduced their sales and earnings.

However, in recent months, Chinese authorities have toned down their digital crackdown in a bid to support a $17 trillion economy that has been severely harmed by the COVID-19 outbreak.

According to Duncan Clark, chairman of investment consulting firm BDA China, “With the Chinese economy in a very tumultuous situation, the government is wanting to express its commitment to growth, and the tech, private sectors are crucial to that as we know.”

After a period of uncertainty, “At last Ant investors can have some schedule for a departure,” said Clark, who is also the author of a book on Alibaba and Ma.

RESEARCH IN REGULATION

The largest mobile payment app in the world, Alipay, is run by Ant and has more than 1 billion users.

Ma and nine of Ant’s other significant owners have resolved to no longer act jointly in the exercise of their voting rights and will only vote separately, according to Ant, whose activities also include consumer financing and the sale of insurance goods.

The revisions, it continued, will not alter the economic interests of Ant’s stockholders.

In order to ensure that independent directors make up the majority of the board of the company, Ant also announced that it would appoint a fifth independent director to its board. There are presently eight board members.

According to the company’s announcement, “there will never longer be a circumstance where a direct or indirect stakeholder will have sole or joint control over Ant Group.”

According to a report in April 2021, Ant was looking into options for Ma, one of China’s most prominent and successful businessmen, to sell his interest in Ant and relinquish control.

Unnamed sources told The Wall Street Journal in July of last year that Ma could relinquish control by giving some of his vote rights to Ant executives, including CEO Eric Jing.

Days after Ma openly lambasted regulators in a speech in October 2020, Ant’s market listing in Hong Kong and Shanghai was shelved. Since then, his vast empire has been the subject of regulatory investigation and restructuring.

Since the regulatory crackdown that has restrained the nation’s technology behemoths and done away with a laissez-faire strategy that fostered breakneck growth, Ma, who was once outspoken, has largely avoided the public eye.

According to Andrew Collier, managing director of Orient Capital Research, “Jack Ma’s resignation from Ant Financial, a firm he founded, illustrates the intention of the Chinese authorities to diminish the power of significant private investors.”

The most productive sectors of the Chinese economy will continue to deteriorate as a result of this tendency.

According to sources last year, Ant and Alibaba have started detaching their businesses from one another and independently seeking new business as Chinese officials frown on monopolies and unfair competition.

The move that began in the middle of last year was confirmed by Ant’s announcement on Saturday that its management will no longer participate in the Alibaba Partnership, a group that can nominate the majority of the board members for the e-commerce behemoth.