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‘China Blocked Jack Ma’s Ant IPO After Investigation Revealed Likely Beneficiaries’
‘China Blocked Jack Ma’s Ant IPO After Investigation Revealed Likely Beneficiaries’
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Factional Politics in the Ant Financial IPO Decision

February 16, 2021
BIG IDEA | ‘Behind layers of opaque investment vehicles that own stakes in Ant Financial are a coterie of well-connected Chinese power players, including some with links to political families that represent a potential challenge to President Xi and his inner circle. Those individuals, along with Mr. Ma and the company’s top managers, stood to pocket billions of dollars from a listing that would have valued the company at more than $300 billion.’

Beijing’s abrupt cancellation of Ant Financial’s gigantic Hong Kong IPO has generated useful analysis on China fintech, risks to the financial system, government regulators, and even Xi Jinping’s temper.

  • But none so useful as ‘China Blocked Jack Ma’s Ant IPO After Investigation Revealed Likely Beneficiaries’ in The Wall Street Journal.

This article (and may there be many more like it) raises the hood on how Jack  Ma divvied up investment in the IPO and how financial vehicles obscured the identities of the investors - none of whom, including Mr. Ma, were in Mr. Xi's favor.

  • In short, a brief primer on how the rich in China help each other to get richer, and how Xi Jinping deals with those he doesn't care for.

But even more interesting, the article contends:

‘When China’s leader Xi Jinping late last year quashed Ant Group’s initial public offering, his motives appeared clear:’

‘There was another key reason, according to more than a dozen Chinese officials and government advisers:’

  • ‘Growing unease in Beijing over Ant’s complex ownership structure—and the people who stood to gain most from what would have been the world’s largest IPO.’
  • ‘Behind layers of opaque investment vehicles that own stakes in the firm are a coterie of well-connected Chinese power players, including some with links to political families that represent a potential challenge to President Xi and his inner circle.’

Among the investors were two friends of Jack Ma with connections to former Chinese leader Jiang Zemin.

  • Mr. Jiang is the leader of the shanghai Clique’ (上海帮), one of the Chinese Communist Party’s major factions.
  • Xi Jinping sees the ‘Shanghai Clique’ as a rival and, through his anti-corruption campaign, has purged many of its members.
  • Mr. Jiang himself, at 94, remains a force behind the scenes - and no friend of Xi Jinping.’
  • ‘Those individuals [the ones with ties Mr. Jiang and others], along with Mr. Ma and the company’s top managers, stood to pocket billions of dollars from a listing that would have valued the company at more than $300 billion.’
  • [Note: I have seen myself a ‘favor’ granted by Mr. Jiang pay off hundreds of millions of dollars to his grandson decades later – the long game indeed.]

Wading through the details of the article you will see a snapshot of how the wealthy in China are interconnected and how investment schemes are used to hide investors identities.

  • But these could apply almost anywhere.

What is different here is how factional politics extends even to decisions such as Mr. Xi’s decision about Ant Financial.

  • In my mind, I see a Xi confidante bursting into Mr. Xi’s offices and saying, ‘You won’t believe who’s going to get even richer from that Ant Financial deal!’
  • And Mr. Xi thinking, ‘Oh no they’re not. Screw Jiang.’

‘In the weeks before the financial-technology giant was scheduled to go public, a previously unreported central-government investigation found that Ant’s IPO prospectus obscured the complexity of the firm’s ownership, according to the officials and government advisers, who had knowledge of the probe.’

  • ‘Behind layers of opaque investment vehicles that own stakes in the firm are a coterie of well-connected Chinese power players, including some with links to political families that represent a potential challenge to President Xi and his inner circle.’
  • [Two of these have ties to Chinese leader Jiang Zemin and his ‘Shanghai Clique’ (上海帮), one of the Chinese Communist Party’s major factions. Although many of Mr. Jiang’s allies have been purged in Mr. Xi’s anticorruption campaign, Mr. Jiang, at 94, remains a force behind the scenes - and no friend of Xi Jinping.]
  • ‘Those individuals, along with Mr. Ma and the company’s top managers, stood to pocket billions of dollars from a listing that would have valued the company at more than $300 billion.’