Ant Receives Approval for $1.5 Billion Capital Plan
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Chinese regulators approved a plan by billionaire Jack Ma’s Ant Group Co. to raise 10.5 billion yuan ($1.5 billion) for its consumer unit, signaling progress in the government-mandated overhaul of the financial technology company.
The department of the China Banking and Insurance Regulatory Commission in Chongqing gave the green light to the company’s plan to increase its capital to 18.5 billion yuan, according to a notice Dec. 30. Ant, which contributed 5.25 billion yuan under the plan, will control half of its shares after the deal, while a Hangzhou city-owned entity will hold 10 percent, becoming the second-largest shareholder. The transaction removes a key hurdle for Ant as it seeks to meet regulators’ requirements after its business faced a crackdown after its record-breaking 2020 IPO was torpedoed and is still waiting to receive a financial holding license that regulate it more like a bank.
The green light is another sign that Beijing is softening its stance on its huge internet sector, traditionally a big engine of growth, while the world’s second-largest economy falters. Last week, authorities approved the most significant batch of new blockbuster game releases in months, giving Tencent Holdings Ltd. was able to refill a pipeline emptied by the raid.
Ma’s Alibaba Group Holding Ltd. shares rose as much as 7.7 percent after Ant news, and the Hang Seng Tech Index extended its rally to 3.3 percent. Tencent is up nearly 4 percent, while Baidu Inc. is up 6 percent.
“We see this as a signal that Ant has completed regulatory rectification,” Leon Qi, an analyst at Daiwa Capital Markets Hong Kong Ltd., wrote in a report. The consumer unit will be able to manage 1.1 trillion yuan in loans once the fundraising is completed, he said.
Other new investors include Sunny Optical Technology Group Co. and Jiangsu Yuyue Medical Equipment & Supply Co. The consumer finance unit brings together the most lucrative online lending businesses from Ant, Huabei and Jiebei.
The current plan is a slimmed-down version of previous efforts to raise capital to 30 billion yuan. Cinda Asset Management, one of China’s bad debt managers, last year withdrew without reason a plan to invest 6 billion yuan for a 20 percent stake in the consumer finance giant.
Ma has kept a low profile since Ant’s IPO was halted. In a July filing, Alibaba reiterated that Ma “intends to reduce and thereafter cap its direct and indirect economic interest in Ant Group over time” to a percentage not to exceed 8.8 percent.