Ant Group Announces Share Buyback as Regulatory Crackdown on Chinese Tech Giants Begins to Ease

Ant Group has announced a share buyback that values the company at $78.5 billion. This valuation is significantly lower than the $230 billion it was valued at nearly three years ago before its initial public offering (IPO) was halted by Chinese regulators. The buyback comes after Chinese financial regulators fined Ant and its subsidiaries a total of 7.1 billion yuan ($984 million) for violations related to consumer protection and corporate governance.

The regulatory crackdown on Ant Group and other tech giants was triggered by Jack Ma’s critical remarks about Chinese financial regulators and banks in a speech delivered in late 2020. Ma’s comments set off a series of measures that included fines for alleged anti-competitive behavior and bans from app stores citing concerns about data security. The regulatory actions had a profound impact on the fortunes of not only Ant Group but also other major players in the Chinese tech industry, including Alibaba Group, Tencent, Didi, and Meituan.

However, with the recent fines imposed on Ant Group, analysts believe that the regulatory pressure on the Chinese internet sector is finally easing. Jefferies analysts stated that the removal of the regulatory “overhang” will likely unlock the valuation of Alibaba and Tencent and benefit other Chinese fintech firms like Lufax by providing better visibility on the sector’s outlook.

The fines levied against Ant Group also raise the possibility of the company reviving its long-anticipated IPO. The IPO was abruptly canceled in November , just two days before it was scheduled to commence trading. The cancellation came after Ant Group had priced its shares, valuing the company at over $310 billion. If Ant Group were to proceed with the IPO, it could become one of the largest share sales in history.

While the regulatory crackdown seems to be coming to an end, the impact on the stock prices of affected companies lingers. Alibaba’s stock price, for instance, is still down more than 70% from its peak in October 2020, resulting in a loss of over $645 billion in market capitalization since the regulatory campaign began.

With the regulatory crackdown on the Chinese tech industry beginning to ease, there is a glimmer of hope for private firms as China aims to support their revitalization. The potential revival of Ant Group’s IPO and the prospects of stock price recovery for major players like Alibaba and Tencent indicate a positive outlook for the sector. However, the road ahead remains uncertain as these companies navigate the evolving regulatory landscape and work towards rebuilding investor confidence.

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