Jack Ma’s troubles started when one of his great deals failed: the Grupo Hormiga IPO.
Chinese mogul Jack Ma has not had a good year-end.
As a co-founder of Alibaba, one of the Asian nation’s largest business empires, he has lost nearly $ 11 billion since late October, when authorities scrutinized his company and other major tech conglomerates.
This year Ma’s fortune was $ 61.7 billion and he got close to becoming China’s richest person again.
However, his net worth fell to $ 50.9 billion, according to the Bloomberg Billionaires Index, which placed him fourth on the arrangement.
The businessman’s troubles began when one of his big companies failed: the IPO of Grupo Hormiga.
In early November, everything was set for what was to be the largest IPO in history, but things didn’t go as planned.
The operation was unexpectedly suspended after a last minute questioning by Chinese financial regulators.
Some analysts interpreted the event as an attempt by Beijing to control the growth of giants such as the Ant Group and Ma itself, which tends to make uncomfortable statements, according to BBC journalist Timothy McDonald from Singapore.
“Ma turned from a symbol of China’s potential and technological advancement into a threat.”
The tycoon is said to have provoked the ire of the Chinese authorities when he openly criticized the state-controlled Chinese bank and compared it to the “Pawnshops” who have no innovative calling.
The power of digital finance
From then on things got complicated for Grupo Hormiga, a conglomerate that has expanded rapidly in recent years.
Ant’s most popular service, Alipay, started out as Alibaba’s payment platform.
Ma publicly criticized China’s state-controlled banking system, comparing it to “pawnshops” that lack innovative vocation.
It held buyers’ money until they received the product they bought online.
Alipay was essential in Alibaba’s growth. Now it is used more than credit cards in China.
When the IPO was suspended, the Hong Kong Stock Exchange stated that this was because Grupo Hormiga “may not meet listing standards and transparency requirements” and suggested that “recent changes” to the regulatory environment for digital financing could be an obstacle.
‘This was big business. But I don’t think China will just make a deal. They will not endanger their financial system for a companyDrew Bernstein, president of Marcum Bernstein & Pinchuk, a company that advises Chinese companies.
Unfair competition?
A few days ago, the Central Bank of China ordered a reorganization of Grupo Hormiga’s operations so that it “corrects” its lending, insurance and asset management services.
According to deputy governor of the People’s Bank of China, Pan Gongsheng, regulators are analyzing “Grupo Hormiga’s poor corporate governance,” his opposition to certain regulations and his practices to win over his competitors in order to prevent unfair competition.
Ant’s most popular service, Alipay, started out as Alibaba’s payment platform.
Grupo Hormiga said in a statement that it would set up a “rectification” working group and fully implement the legal requirements.
While some experts believe this new regulatory attack is targeting Ma, others believe financial sector reform is a long-term goal of the Beijing government that goes beyond the business of the businessman.
Although the company operates as the largest payment provider in China, with more than 730 million monthly users of its Alipay service, the company’s credit practices seem to be of greatest concern to regulators.
Ma isn’t alone
While Jack Ma has been at the center of the controversy, he’s not the only one to face increased regulatory scrutiny.
The fintech sector appears to be in the crosshairs of Chinese regulators.
Some companies are already adapting their way of working, probably to anticipate possible new regulations in the sector.
For example, JD Digits, Tencent, Baidu and Lufax stopped selling interest-bearing deposits on their platforms after authorities forced Grupo Hormiga to do the same.
“I don’t think anyone is immune at this stage and certainly the principles by which Grupo Hormiga associates its consumers with financial products are very similar to what Tencent does, ”adds Norris.
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