Explainer: What’s next for Jack Ma’s Ant group after the Chinese orders overhaul?
China imposed a sweeping restructuring plan on Jack Ma’s Ant Group, the fintech conglomerate whose record $ 37 billion IPO was derailed by regulators in November, which will see the group become a financial holding company between other.
Ant, valued at around $ 315 billion at its IPO price, is also exploring options for founder Ma to divest his stake and relinquish control, as meetings with regulators have signaled the move could help. to draw a line under Beijing’s scrutiny of its activities, Reuters exclusively reported on Saturday. Read more
Here’s a look at what the company needs to do in the short to medium term following the overhaul:
HOW MUCH ADDITIONAL CAPITAL DOES IT NEED?
The new regulations require fintech platforms to own 30% of all loans they co-lend with banks.
Brokerage Jefferies estimated in a report last week that Ant will need 13.4 to 20.1 billion yuan ($ 2-3 billion) of capital to meet the minimum capital adequacy ratio of credit companies. for consumption. One-third to one-half of Ant’s 1.7 trillion consumer loans are in the co-lending model, Jefferies estimates.
HOW WILL ANT RAISE CAPITAL?
It will be difficult for Ant to inject more capital into his consumer finance company, of which it only owns 50%, brokerage firm Macquarie said.
In addition, Ant will then have to convince other shareholders to find more capital to maintain the stake percentages, said a Hong Kong-based analyst with a U.S. asset manager who had subscribed to the halted IPO of Ant.
If that is not possible, any potential change in shareholding will require negotiations over the valuation of the company that Ant might not want to go to, the analyst added.
An investor in Ant, however, told Reuters that the potential capital shortage would be well within Ant’s means and that he would not need to raise more money from outside investors.
Ant declined to comment.
The analyst and investor spoke on condition of anonymity as they were not authorized to speak to the media.
HOW WILL THE ANT ASSESSMENT CHANGE AFTER RESTRUCTURING?
It’s too early for analysts to come up with a new valuation estimate based on Ant’s overhaul plan, as more details are needed.
Some investors have told Reuters they are optimistic that Ant will not be priced as cheap as a Chinese bank, given the scope of its business and the technology and power of data it has. owns in the second largest economy in the world.
Major lenders from major Chinese banks are trading at 5-12 times forward earnings and 0.4-1.7 times their forward book value, according to Eikon data. According to Reuters Breakingviews calculations, the ant would be worth $ 33 billion if valued at a single book value based on its reported net assets last year.
Some global investors have valued Ant at more than $ 200 billion based on its performance in 2020, Reuters reported. Read more
WHAT HAPPENS TO ANT PAYMENT ACTIVITIES?
It’s unclear how Ant will separate its payments business from its Jiebei and Huabei credit products.
Jiebei and Huabei are currently integrated into Alipay and rely on the mobile payment application for user traffic.
Any unbundling would reduce users of credit products and potentially affect the quality of Ant’s loans if data access at Alipay were somehow limited or affected, the Hong Kong-based analyst said. .
WHAT ELSE WILL CHANGE WITHIN THE RESTRUCTURING FRAMEWORK?
Ant said he would set up a personal credit reporting company and apply for a personal credit reporting license.
She is already a shareholder of Baihang Credit, one of the only two credit agencies approved by the central bank.
Macquarie analysts believe the People’s Bank of China cannot license Ant for its own credit company, while Jefferies said Ant may have to partner with a state-owned company to set up the agency.
Our standards: Thomson Reuters Trust Principles.