(CTN News) – Alibaba Group and Tencent shares rose on Monday after China fined Ant Group $984 million, raising hopes that a three-year crackdown on tech firms is nearing an end.
A 3.2% rise in Alibaba shares beat a 0.6% gain for the Hang Seng index. Tencent shares closed 0.7% higher.
Earlier this year, Chinese regulators cancelled Ant Group’s plans for what was to be the world’s largest IPO, valued at $315 billion.
Beijing’s shelving of the IPO started a sweeping regulatory crackdown across a variety of industries.
After years of rapid growth, Beijing sought to assert its authority over what it perceived as excesses and bad practices in the private sector.
As a result of the scrutiny, companies such as Alibaba, Tencent, and Meituan saw their share prices drop by billions.
Beijing’s crackdown on technology is largely over with the fine on Ant, one of the biggest ever for a Chinese internet company.
China’s People’s Bank of China (PBOC) announced the fine on Friday, citing violations of corporate governance, financial consumer protection, payment and settlement business, and anti-money laundering laws.
Regulatory agencies will now shift their attention from focusing on specific companies to regulating the industry as a whole rather than focusing on platform companies’ financial businesses.
Moreover, Tencent’s Tenpay online payment platform was fined $414.88 million for violating customer data management guidelines.
Huatai Research analysts believe that this announcement marks an important step in establishing a regular, transparent, and visible regulatory environment for the Chinese internet industry.
An unexpected share repurchase Alibaba
In response to the penalty, Ant announced a $6 billion share buyback, which valued the fintech giant at a 75% discount to the scrapped 2020 IPO.
At a price representing a group valuation of approximately $78.5 billion, Alibaba’s affiliate proposed to repurchase up to 7.6% of its equity interest.
In addition to providing liquidity and a sense of certainty to investors, the buyback plan caught investors by surprise.
On Sunday, Alibaba, which spun off Ant 11 years ago and owns a 33% stake, announced it was considering participating in a buyback to transfer shares to employee incentive plans.
Hangzhou Junhan Equity Investment Partnership and Hangzhou Junao Equity Investment Partnership, which hold more than 50% of Ant’s shares on behalf of its executives and employees, will not participate in the buyback.
IPO plans likely ‘on hold’
Finalization of Ant’s penalty is believed to pave the way for the firm to obtain a financial holding company licence, boost its growth rate, and eventually reviving its plans for a public listing.
Analysts, however, are questioning whether Ant will proceed with its planned listing in the near future.
As stated by the company, the buyback is intended to provide liquidity to existing investors and to attract and retain talented individuals through employee incentives, according to LightStream Research analyst Oshadhi Kumarasiri.
According to Ant, it would have been possible to achieve both of these objectives through an IPO … This essentially means that the IPO has been suspended.