One day after Jack Ma-backed Ant Group Co. was hit with a billion-dollar fine by the People's Bank of China, the fintech giant announced a surprise share buyback on Saturday that values it at around $78.54 billion. That is 75% below its value of $315 billion, touted ahead of a scrapped initial public offering in 2020.
A much-needed liquidity event is opening up for early Ant investors after the abandoned IPO and following Beijing's multi-year crackdown on the fintech company and the tech sector.
Reuters said Ant has "proposed to all of its shareholders to repurchase up to 7.6% of its equity interest at a price that represents a group valuation of approximately 567.1 billion yuan ($78.54 billion)." That represents a massive 75% discount versus the $315 billion valuation, which was set to be the world's largest IPO.
"The repurchased shares will be transferred into Ant Group's employee incentive plans to attract talent. The repurchase proposal will also provide a liquidity option for the company's investors," Ant said.
Ant said that Hangzhou Junhan Equity Investment Partnership and Hangzhou Junao Equity Investment Partnership, some of Ant's top shareholders, have decided not to participate in the repurchase. These firms collectively hold half of Ant's shares for the company's executives and employees.
"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.
"Liquidity might be more important than valuation for some investors that look to exit," said Zhang Zihua, chief investment officer at Beijing Yunyi Asset Management which is an investor of Ant's affiliate, e-commerce titan Alibaba.
Allowing some early investors to exit could ease pressure before another attempt to go public.
"The buyback price is higher than the valuations made by many institutions internally ... so I believe that some institutions will choose to participate in the buyback," said Hanyang Wang, an analyst at 86Research.
Jack Ma's empire of Alibaba and Ant has been under fire by Chinese regulators for 2.5 years. Regulators slapped Alibaba with a $2.8 billion antitrust fine in 2021. On Friday, regulators hit Ant with a $985 million penalty -- some see this as a resolution to the fintech's regulatory woes.
