Chinese technology tycoon Jack Ma’s disappearing act has added a layer of intrigue to a calculated strike by the Chinese government to teach its homegrown technology star some humility.
Having amassed a personal fortune of over $US50 billion ($65.5 billion) since the inception of Alibaba in 1999, Ma’s vision has moved well beyond letting consumers, predominantly Chinese, buy things online and make payments. Ant Group, which saw its $US35 billion ($45 billion) IPO scuttled by Beijing, aspires to be a far more pervasive platform that offers myriad functions but also captures vast amounts of data.
The form and function of Ant’s technology platform is no different to that of Google, Facebook and Amazon.com. And just like its US ‘Big Tech’ peers, Ant and its parent Alibaba, have become so dominant that regulatory action was inevitable.
As it turns out, the necessary trigger came courtesy of Ma and his speech late-October last year at a high-profile financial forum in Shanghai, where the tech tycoon berated the Chinese banks for acting like “pawn shops”.
Ma has been remarkably quiet since then. The Ant IPO has sunk and the company could potentially be broken up as regulators look to get the company to provide more transparency on its inner- workings. Faced with this level of scrutiny keeping a low profile is probably in Ma’s best interest.
But headlines like “Jack Ma is missing” sparked memories of the country’s dealings with other high profile businessmen.
Earlier this week China sentenced Lai Xiaomin, the former head of one of the country’s biggest asset manager China Huarong Asset Management Co, to death on charges of corporate malfeasance as part of President Xi’s anti-corruption crackdown.
In 2015, China executed the then boss of Hanlong Mining, billionaire Lui Han, over running a ‘mafia-style’ operation in the country. Lui was widely believed to have links to disgraced former security tsar and President Xi corruption target Zhou Yongkang.
Of course, that’s not to say we’ll see Ma in handcuffs any time soon. But his wings have most certainly been clipped and Ma’s technology empire, built on the back of his e-commerce Alibaba and its payments spin-off Alipay, is no stranger to regulatory intervention, Chinese or otherwise.
Along with its anti-trust investigation, Alibaba and its associated entities are also feeling the brunt of the US’s retaliatory action against China over the trade war.
This week, US President Donald Trump signed executive orders banning transactions with eight Chinese software applications, including Ant Group’s Alipay. The move is likely to have a significant impact on Alipay’s earnings.
But to say Alibaba and Ant Group is simply the victim of an oppressive Chinese government and tit-for-tat responses from the US is wrong. Alibaba has long thrown up red flags for investors.
While undeniably delivering strong results for its shareholders, Alibaba has been called out over its byzantine structure and un-traditional approach to governance and transparency.
Alibaba’s 2014 listing in New York was the biggest in the history of the New York Stock Exchange, raising $US25 billion from investors. Its float also sparked warnings that the Chinese giant had set up a structure that reduced the rights that shareholders traditionally enjoyed in a US-listed company.
Alibaba calls this structure the Alibaba Partnership. Under the partnership, Alibaba’s investors are not involved in electing directors to the board of the group like in most companies. Instead, a group of senior staff and members and co-founders nominate candidates and as a result hold control over the board.
It was exactly this structure that stopped Alibaba from initially pursuing an initial public offering in Hong Kong in 2014. Yet all was forgiven in 2019. Jack Ma stepped down as chairman, paving the way for Alibaba to pull off a secondary listing on the Hong Kong exchange raising $11.2 billion, breaking records for the Hang Seng.
When blocking Ant Group’s listing in early November, Chinese regulators cited “major issues” it feared could cause the company to be unable to “meet the listing conditions or disclosure requirements”.
And its seems as though it could be Alibaba and Ant Group’s governance that could be just as big a part of Ma’s problems as any anti-trust investigation.
Beijing will hope that the tech tycoon emerges from his self-imposed exile at some point suitably chastened and the concerns put forward by the Chinese authorities are not all that dissimilar to those espoused by lawmakers in the US, the European Union and in Australia.
Ma and Ant Group may well have become collateral damage in what is shaping up as a global anti-trust push against pervasive technology platforms.
Breaking up these global technology behemoths is a key agenda for many regulators, some of whom would no doubt love to exercise power as swiftly as the Chinese authorities.
Source: Thanks smh.com