Jack Ma is no stranger to taking risks. In October 2020 he was China’s wealthiest man, preparing to float Ant Group, a fintech company, in what was billed to be the largest IPO in the world. “Miracles happen,” he told the assembled dignitaries, academics and political heavyweights who had gathered at the Bund Summit in Shanghai on October 24. At the time, Ant Group was prepared for a dual listing in Shanghai and Hong Kong. “This is the largest listing ever priced in the history of the entire human race, and the pricing happened in a place other than New York City,” he said.
But the listing never happened. That night was the last time that he was seen in public — since that speech, despite being one of the most high-profile people in the global tech sector, Ma has vanished.
In the weeks before his disappearance, there were rumours circulating that regulators in China might be about to slam the brakes on Ant’s listing. But if Ma’s intention was to win over the audience – which included the vice president of China Wang Qishan (who had delivered the opening remarks of the summit), the head of the People’s Bank of China, and all of the major players in Chinese finance – then the rest of his speech was a deft lesson in how to lose friends and alienate people. He described China’s financial system as operating “with a pawnshop mentality” and that the regulatory environment was akin to trying to “use the way to manage a railway station to manage an airport”.
His comments were so brash that they reportedly caught the attention of Chinese president Xi Jinping. Retribution was swift. On November 2 Ma, alongside Ant’s executive chairman Eric Jing and CEO Simon Hu, was summoned and interviewed by regulators. When this interview was made public by the China Securities Regulatory Commission, the Shanghai Stock Exchange decided to halt Ant’s IPO on November 3, just two days before it was supposed to go live.
Alibaba Group, the tech giant that Ma founded and which launched his international reputation, had a 33 per cent share in Ant Group. Its stock price dropped seven per cent on the announcement. But that was not all – over the coming weeks the laws surrounding antitrust would be redrafted in China and Alibaba would be fined. And, all the while, Ma was nowhere to be found.
By the end of the year Alibaba’s shares had fallen by almost a quarter. Ma’s net worth dropped by almost $10 billion over the same period, according to data from Bloomberg. Ma Huateng, the founder of rival tech firm Tencent, pushed him off the top spot to become China’s richest person.
So how did everything go so wrong? After all, Ma is known for his charisma – he speaks good English, is a darling of the Western media and is not shy of being the centre of attention. He once impersonated Michael Jackson, in full costume and with accompanying dance moves, in front of 30,000 Alibaba employees at the company’s annual party. He starred in his own Kung-Fu movie, which he decided to premiere at Alibaba’s Singles Day event in 2018, inviting Nicole Kidman on stage to clap along.
But this was not the Ma that appeared at the Bund Summit in October 2020. Gone was his carefree charm and irreverent humour. “Mr Ma is a big personality, but on stage he seemed stilted. He read his speech instead of giving it off the cuff which is out of character,” says Duncan Clark, an early consultant to Alibaba and author of The House That Jack Ma Built. “There are a lot of powerful vested interests and a lot of employees within Alibaba itself who would have made a lot of money in that IPO,” he adds, “I’m sure he was under a lot of pressure.”
On September 16, 2020, a little over a month before the speech, the China Banking and Insurance Regulatory Commission issued new guidelines stating that funding from banks and shareholders should not exceed a microfinance company’s total net assets. This was potentially a huge blow to the company.
In recent years Ant has taken on an outsized role in providing credit and loans, acting as matchmaker between China’s dynamic and expanding consumer class and the ossified state banking sector that has been unable to reach them. As per the filing to the Hong Kong exchange, Ant said it retained only about two per cent of these loans on its balance sheet as of June 30, with the rest funded by third parties or packaged as securities and sold off. The new guidelines potentially meant a huge shake-up to Ant’s core revenue stream – and Ma’s future plans.
It wasn’t just Ant that had been coming under scrutiny. China’s tech scene is dominated by three companies, often referred to as BAT – Baidu, Alibaba and Tencent. As of 2018 these companies alone either invested in or owned outright over half of the 124 ‘unicorns’ in the Chinese economy (companies valued over $1bn).
The three firms have been accused of using this power to create impenetrable monopolies and prevent market competition by using their vast scale to quash smaller rivals. In recent months the government has made numerous overtures that it was ready to bring these giants to heel. It’s unclear therefore whether Ma simply misread the room or whether his speech was a strategic last-ditch attempt to save his IPO. After all, he is no stranger to making bold comments and standing his ground.
When Ma created Alipay, the digital payments service that is a cornerstone of Ant’s business, he was stepping into controversial territory. That this crucial piece of digital infrastructure should have been created by a private enterprise in China, and not one of the state-owned banks or the central bank itself, was a risk. He repeatedly told key executives in Alibaba that he was willing to go to jail if it came to it, aware that launching the product might see him fall foul of the authorities. He had already formalised a line of successors should his underlings also have to follow him. The gamble paid off – as of last year Alipay had 700 million users and handled a staggering $17 trillion payments – all but $100bn of them within China alone.
It was deft moves like this that had propelled Ma to global fame and, until his recent change in fortunes, to his pedestal place as China’s most successful business person. His comments could be seen as just another case of Jack being Jack, attempting to ward off the coming storm from the regulators. Had they paid off, and he managed to get his IPO through, it would have been another footnote in the long saga of his success. But it wasn’t to be.
The last time he was seen in public was at the Bund Summit itself, and after his meeting with regulators the trail goes cold. By December 31, 2020, media organisations in the West started reporting that Ma had gone missing. The Financial Times noted that he hadn’t appeared at Africa’s Business Heroes, a talent show where he was a judge. He was abruptly replaced for the show’s final shot in November, and promotional videos were hastily cut to remove any reference to him.
For Ma, a regular at international functions like Davos, to suddenly disappear after crossing the government raised eyebrows. In 2019, China’s most famous actress Fan Bingbing similarly vanished from view for four months. She emerged with a Weibo post pledging loyalty to the communist party and a fine of nearly £100m for tax evasion and other offences.
Could the same thing be happening to Ma? In early November, sources confirmed to the Wall Street Journal that Xi Jinping himself had been involved in halting Ant’s IPO. On realising that Ma had been absent from public view for a while, the rumour mill quickly cranked itself into overdrive.
Sources close to Ma told WIRED that he is lying low, keeping himself out of the spotlight and making himself available to the authorities while the regulators decide what to do about Ant. He is said to be in Hangzhou, the city where he founded Alibaba.
In a question and answer session with reporters in late December, Pan Gongsheng, a deputy governor of China’s central bank, said Ant’s corporate governance was “not sound” and ordered it to “return to its origins” as a payment services provider. However, as Zichen Wang, a reporter for the state-run Xinhua News Agency pointed out, neither Ant nor Ma were accused of breaking any law or committing any crimes.
They are accused of “rule-breaking” for the way that the company leveraged the poor regulatory framework in China to create an elaborate credit and lending system in such a short space of time without having to maintain the kind of leverage that banks do. If the crux of the complaint is a technical one on how the business operates, rather than egregious wrongdoing or illegal activities, it appears that Ma is not in serious trouble.
Instead, his decision to lay low may not just be because of the government itself, but because of pressure from the many investors and employees within Alibaba who have lost millions from the stalled IPO.
Ma has admitted in the past that Alibaba’s success is due in no small part to significant support from the local government in Hangzhou. He has said that his relationship with Beijing is cordial, but not close – he once told reporters that the best relationship you can have with the government is to “be in love with them, but don’t marry them”. On a local or provincial level that doesn’t mean there is no significant government investment in Alibaba and Ant group. While these entities may not have the power of Beijing, their power should not be underestimated.
It is likely that we won’t see Ma until regulators have delivered a final verdict on what will happen to Ant and Alibaba. Until then, to be seen in public would mean fielding questions to which he may not yet have the answer; and to risk saying something that might once again put him in hot water. Reached for comment, a spokesperson for Alibaba declined to comment on when Ma can be expected to be next seen in public.
It can be easy, as some commentators have done, to portray this story as a clash of egos. China’s richest person tried to talk down a room of China’s most powerful politicians, and spectacularly failed.
But it’s far more complex than that. Ma’s star has dimmed in recent years in China. He stepped down as CEO of Alibaba in 2019 and hasn’t turned up to the two record-breaking Single’s Day events that the company has held since then, allowing the spotlight to shine on current CEO Daniel Zhang. His focus on philanthropic enterprises may have increased his profile in places like Africa and Latin America, but has meant he is less present in the Chinese media.
He has also made comments that have caused widespread ire amongst Chinese netizens. Referring to problems with overworking, which are endemic in China, he said people were lucky to have jobs that made demands of them. “I personally think that 996 is a huge blessing,” he said, referring to work days that last from 9am to 9pm, six days a week. “How do you achieve the success you want without paying extra effort and time?” The comments did little to ingratiate him with the hundreds of hundreds of millions of struggling Chinese who are not billionaires.
If it wasn’t a clash of egos, then what brought the IPO crashing down in such dramatic fashion just days before it was supposed to go live? “It’s regulatory failure,” says Rui Ma, a tech analyst specialising on China. The fact that the IPO was called off so close to the line and in such dramatic fashion has cast aspersions on how mature markets are in the country. “The problem is that there is fine fragmentation of the regulatory bodies, which means that an internet business like Ant that spans multiple industries allows regulatory bodies to step back and say that’s not really my domain.” The fact that there are also a lot of powerful vested interests in Ant and Alibaba has also surely acted as a brake on any regulation.
In the shadow of the failed IPO, it appears regulators are keen for Ant to be seen as a financial services provider. Draft rules have already been drawn up which would place a $45,000 cap on microloans and that lenders will have to put up 30 per cent of the capital in any trade. This will mean a huge reallocation of assets and liquidity within Ant Group. If it is understood as a financial services company and not a tech company it will also create profound downward pressure on its future valuation if it ever does manage an IPO.
The fact that these rules did not come sooner represents a key issue that China faces as it develops into a mature economy with a more developed technology sector. The government is desperate to boost innovation and maintain steady economic growth, but it is wary of ceding too much control to private firms. In the realm of personal finance not only did Ant pose a risk in terms of leverage, but also in amassing such a huge body of consumer data that the government may find useful for its own purposes.
Chinese netizens have welcomed the government’s decision to intervene. Ant has been widely criticised for predatory lending in recent years. The two per cent leverage it held on its books created moral hazard to incentivise making ever riskier loans to people unable to pay them back. One commentator for a state broadcaster called Ant a “vampire” and a “parasite”. On Weibo one person commented, “Ant Group has been sucking the blood out of Chinese borrowers for a long time. The punishment is long overdue.”
It appears that the antitrust case against Alibaba will only deepen. Zhang Gong, the head of the The State Administration for Market Regulation (SAMR), reaffirmed the agency’s commitment to keeping the pressure on, according to an interview published on by Xinhua. Zhan said that SAMR will move first to cure the “causes” of monopolies and regulate their “consequences”.
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