Ant Group’s unexpected share buyback has valued the company at a significant 75% discount to its initial public offering (IPO).

Ant Group Announces Surprise Share Buyback, Valuing Fintech Giant at $78.54 Billion

By Julie Zhu and Josh Ye

HONG KONG (Reuters) – Ant Group has made a surprising move by announcing a share buyback that values the company at $78.54 billion. This is significantly lower than the $315 billion valuation from its abandoned IPO in 2020. The buyback provides an opportunity for some investors to exit following a lengthy regulatory overhaul of the firm.

The news comes just one day after Ant was fined $984 million, marking the end of a years-long regulatory shake-up and a crucial step towards resolving the crackdown on China’s internet sector.

Ant has proposed a share repurchase of up to 7.6% of its equity interest, offering a group valuation of approximately 567.1 billion yuan ($78.54 billion). This represents a significant 75% discount compared to its 2020 valuation of $315 billion, which would have made it the world’s largest IPO if not for the intervention of Chinese regulators.

“The repurchased shares will be transferred into Ant Group’s employee incentive plans to attract talent. The repurchase proposal also provides a liquidity option for the company’s investors,” Ant stated.

Ant’s major shareholders, Hangzhou Junhan Equity Investment Partnership and Hangzhou Junao Equity Investment Partnership, have voluntarily decided not to participate in the repurchase.

“While Ant buys back shares at a valuation much lower than the $150 billion figure in the company’s last fundraising round in 2018, the plan provides some liquidity to its existing investors,” said Zhang Zihua, chief investment officer at Beijing Yunyi Asset Management.

China’s central bank announced on Friday that Ant and its subsidiaries would be fined a total of 7.12 billion yuan. This penalty is seen as a step towards securing a financial holding company license for Ant, allowing it to focus on growth and potentially revive its plans for a stock market listing.

“China needs to resolve the Ant IPO to restore investor confidence,” said Wang Qi, CEO of MegaTrust Investment.

Founded by billionaire Jack Ma, Ant operates China’s popular mobile payment app Alipay and other financial services. The company underwent a significant business restructuring in April 2021, transforming into a financial holding company subject to banking regulations.

Ant’s fine and share buyback mark important milestones in China’s crackdown on private enterprises, which began with the cancellation of Ant’s IPO in 2020 and had a ripple effect on the market value of several companies.

Despite the lower valuation, some institutions are expected to participate in the buyback, according to analyst Hanyang Wang.

On Friday, Chinese authorities also announced fines against two banks, an insurer, and Tencent Holdings’ online payment platform Tenpay. The People’s Bank of China stated that most of the issues with platform companies’ financial businesses have been addressed, and regulators will now focus on overall industry regulation.

($1 = 7.2205 Chinese yuan renminbi)

(Reporting by Julie Zhu, Josh Ye, Brenda Goh, Zhang Yan and Scott Murdoch; Editing by Shri Navaratnam and Kim Coghill)

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