Alibaba Group is considering selling shares to Ant Group as part of its financial affiliate’s proposed buyback.
News of the buyback comes after Chinese regulators said they were normalizing supervision of the nation’s platform companies.
Ant, the operator of Alipay, notified shareholders of a meeting to approve its proposed repurchase of up to 7.6% of its equity, Alibaba said in a stock exchange filing. Alibaba holds a third of Ant’s equity.
Ant is offering to buy back up to 7.6% of its equity at a price that values the financial services company at about RMB567.1 billion (about $78.48 billion).
In a move designed to attract talent and provide liquidity for investors, the repurchased shares will be transferred into Ant’s employee incentive plans.
Out of the commitment and confidence in the long-term development of Ant, major shareholders Hangzhou Junhan Equity Investment Partnership and Hangzhou Junao Equity Investment Partnership, have decided not to participate in the repurchase, Ant said in a statement. The limited partnerships included Ant senior managers according to its IPO prospectus in 2020.
Normalizing Regulation
The People’s Bank of China said regulators have supervised and guided platform companies since November, 2020. In response to violations of laws and regulations, logged by the National Administration of Financial Regulation, Ant was fined RMB7.123 billion.
Most of the outstanding problems have been rectified and supervision has normalized, the PBOC said.
“The penalty is a positive development not only for Alibaba but the entire internet space,” said analysts including Alex Yao at JP Morgan.
Regulatory normalization “removes overhang to the stock,” said Jefferies’ equities analysts Thomas Chong and Zoey Zong in a research report. Jefferies estimates Ant’s valuation at about $100 billion.
