Alibaba chairman Jack Ma has invested in a Chinese consumer-focused app that had been struggling to find funding. The company aims to improve the quality of life for consumers, but faces competition from Alibaba’s own Taobao marketplace.
Jack Ma’s “ant group ipo” is a move that could potentially boost consumer confidence in the Chinese economy.
Ant Group Co.’s consumer finance unit is increasing its financial muscle with a $3.5 billion capital round, with the majority of outside investment coming from a strong state-owned institution.
The share offering would almost treble the registered capital of Chongqing Ant Consumer Finance Co., bringing it to 30 billion yuan (about $4.7 billion). This will enable the business to retain a larger balance sheet, allowing it to provide more credit to consumers, and is a significant step forward in Ant’s transformation.
After Chinese regulators rejected Ant’s initial public offering in November 2020, the financial technology firm founded by billionaire Jack Ma was compelled to restructure its operations.
Ant’s massive consumer-lending business, in which it originated loans for outside lenders who carried the majority of the credit risk, earned Beijing’s ire.
The unit symbolizes a change to a new business model that includes a broader variety of financing sources. Regulators authorized the firm early this year, and it was registered in the Chongqing municipality in southern China. It contains the Huabei and Jiebei Ant credit services, which have been utilized by over half a billion individuals in China.
As part of the larger-capital raise, China Cinda Asset Management Co. 1359 -0.76 percent, a significant state-owned corporation listed in Hong Kong, announced Friday it would spend 6 billion yuan, or $942 million, for a 20 percent share in the business.
Cinda stated its participation will allow it to “develop strong collaboration with the industry’s major consumer financial service providers.”
Cinda claimed three additional new investors are also purchasing shares. Yufu Capital, a subsidiary of Sunny Optical Technology (Giant) Co., a Hong Kong-listed smartphone component producer, and a firm controlled by Chinese internet group NetEase Inc.
Ant will spend half of the additional cash and keep a 50% ownership in Chongqing Ant Consumer Finance Co., while another current stakeholder will reinvest and keep their shareholding.
After criticizing Chinese authorities, Beijing halted the IPO of Jack Ma’s fintech company Ant, and he virtually vanished from public view. The Wall Street Journal examines recent footage of the millionaire to see how he got himself into trouble.
To perform loans in China, consumer finance companies must have a certain amount of registered capital. That capital may also be utilized as a source of financing, alongside bank deposits, wholesale borrowing from other financial institutions, and asset-backed securities, to assist decide how much a company can lend based on regulatory leverage ratios.
Cinda started as one of a few “bad-debt managers” set up to assist China’s main banks in resolving sour debts. It wasn’t a direct investor in Ant earlier, but its affiliate Nanyang Commercial Bank Ltd. supplied funds and currently has a 4% share in the company.
Ant Group and Alibaba in China are owned by Jack Ma.
Elaine Yu can be reached at [email protected].
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