Alibaba, the Chinese e-commerce giant, has announced that it intends to retain its one-third shareholding in Ant Group, a financial technology company, and will not be selling any of its shares. The decision is motivated by the desire to maintain its stake in this “important strategic partner.”
In a recent filing, Alibaba Group Holdings stated that it will not be participating in Ant’s share buyback program. This program allows shareholders to sell back up to 7.6% of their holdings at an unspecified price, which values Ant Group at 567.1 billion yuan ($78.8 billion).
Ant Group, known for operating China’s leading mobile payments service, Alipay, experienced a significant drop in valuation, losing nearly 70% of its value since its planned IPO in 2020. The IPO plans were thwarted by regulatory investigations, resulting in a fine of nearly $100 billion due to violations of laws and regulations in the payments sector.
Amid the significant decline in Ant Group’s valuation, investors who choose to sell their shares back to the company as part of the share repurchase program are likely to receive much less than they would have gained in 2020.
In response to this situation, Alibaba emphasized the importance of Ant Group as a vital strategic partner in its various businesses. Consequently, Alibaba has decided not to sell any of its shares to Ant Group during the proposed share repurchase, opting instead to maintain its current shareholding in the company.
Initially, there were indications that Alibaba might consider selling some shares during the program, but the recent filing clarifies their decision to hold onto their stake.
Ant Group, founded by Alibaba’s co-founder Jack Ma, operates Alipay, the primary payment method on Alibaba’s Taobao and Tmall e-commerce platforms. Alipay serves an impressive user base of over a billion individuals.
In an effort to enhance shareholder value, Alibaba previously restructured its operations into six distinct business groups. The company plans to spin off these businesses into separate entities that could potentially go public, thereby raising additional funding.
One of the upcoming listings includes Alibaba’s cloud unit, led by former CEO Daniel Zhang, which is expected to be listed within the next year, as announced in May.