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Jack Ma Backed Ant Group Plans to Buyback Shares at 70% Valuation Below its IPO Price

Ant to buy back shares at 70% lower valuation than at IPO.

Ant Group, backed by Jack Ma, is considering a share buyback of up to 7.6% of its shares to retain talent and provide an exit for investors affected by regulatory challenges.

Ant Group has announced its intention to repurchase its equity, resulting in a valuation of approximately 567.1 billion yuan ($78.5 billion). This valuation represents a significant decrease of almost 70% compared to the company’s market capitalization of $280 billion during its abandoned IPO in late 2020. The repurchased shares will be allocated to Ant’s staff incentive plan to attract talent.

Chinese regulators have indicated that the extensive crackdown on the tech industry in the country is nearing its conclusion. This follows the imposing over $1 billion in fines on Ant Group and Tencent Holdings Ltd. on Friday. Ant Group has successfully completed the mandated restructuring of its extensive fintech operations, negatively impacting its profitability.

In a positive development, the individual limited partners of the two entities that comprise the majority of Ant’s shareholders, primarily composed of Ant executives, have voluntarily chosen not to sell their shares back to the company. This decision reflects their long-term commitment to Ant and its objectives.

The limited partners have also pledged to retain the two dividends in 2022 through Hangzhou Junhan and Hangzhou Junao, which will strengthen the company’s capital position and operational capabilities.

With the regulatory challenges now resolved, Ant Group can focus on pursuing business growth. This development also opens up the possibility of reviving its initial public offering (IPO) plans.

Financial regulators have concluded their investigations into Ant Group by imposing a fine of 7.12 billion yuan, marking the end of a more than two-year probe into the company. Tencent, on the other hand, received a fine of 2.99 billion yuan, according to statements from the central bank on Friday.

Following this news, Tencent and Ant’s affiliate, Alibaba Group Holding Ltd., experienced significant gains in New York trading. Suppose there is a substantial relaxation of restrictions on Ant Group, which has been one of the prominent targets of President Xi Jinping’s extensive crackdown on tech giants in the country. In that case, it will strongly indicate that policymakers are delivering on their recent commitments to support the industry.

Ant Group is actively working on the development of large-language model technology to drive ChatGPT-style services. This move puts them in the company of other Chinese firms aiming to gain an advantage in next-generation artificial intelligence. Ant Group has significantly increased its investment in research and development, allocating approximately 20.5 billion yuan to such efforts last year. This amount represents a doubling of their annual expenditure compared to 2019, highlighting their commitment to advancing AI capabilities.

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