Billionaire Jack Ma's Conflict With Chinese Govt Has Cost His Companies Over $850 Billion

As billionaire Jack Ma¡¯s conflict with the Chinese government draws to a close after almost three years, what's also becoming clear is how costly it was for his companies - Ant Group and Alibaba Group.

For the unversed, Jack Ma founded the Chinese financial service company Ant Group in 2014 and co-founded e-commerce giant Alibaba Group in 1999.

Latest $1 Billion Fine On Jack Ma's Company

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Chinese authorities recently said that they would wrap up a probe into Ant group, with the financial technology company paying a fine of almost $1 billion. The investigation began after Jack Ma critiqued Beijing¡¯s regulation of the financial sector in 2020, forcing Ant to pull the plug on what would have been the largest initial public offering (IPO) in history.

But the total costs go far beyond the latest fine. The crackdown has also further eroded confidence in the private sector in China as the country faces growing weakness in everything from consumer spending to the housing market, exports and infrastructure investment. Ant has had to overhaul its business model, pulling back from sensitive sectors and easing up on competition with state-backed banks.

$850 Billion Loss To Jack Ma's Two Companies

The lost value for Jack Ma¡¯s companies is more than $850 billion, which in itself is a sign of how difficult it will be to rebuild trust with international investors.

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Also Read: Explained: What Is 'Balance Sheet Recession' And How China Has Fallen Into It

Ant group's valuation, envisioned at about $315 billion after the IPO, has dropped to about $78.5 billion. A couple of days ago, Ant group proposed to buy back as much as 7.6% of shares in an effort to provide a chance to cut stakes for investors trapped by a years-long regulatory crackdown at the fintech powerhouse. On the other hand, Alibaba is weighing whether to offer up some of its Ant shares to the buyback, the company said Sunday in an exchange filing, as per Bloomberg.

Also, Alibaba hasn¡¯t fared any better. Chinese President Xi Jinping¡¯s administration targeted the e-commerce pioneer in a crackdown on leading internet platforms, and Alibaba said earlier this year it would split into six major businesses. Alibaba¡¯s market value is $234 billion even after an 8% rally in its US-listed shares Friday with the end of the Ant probe. That¡¯s about $620 billion off of its peak in 2020. Its Hong Kong-listed stock jumped as much as 5.6% on Monday.

Jack Ma¡¯s Hangzhou-based empire was at the heart of a Communist Party smackdown that hit wide swaths of the private sector, from real estate and online education to games and ride-hailing. The reforms wiped more than $1 trillion from Chinese stocks, with venture capitalists and institutional investors paying a price for the party¡¯s values.

Also Read: Alibaba To Split Its $220 Billion Empire Into Six Businesses

Problems Still Remain For China

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While China¡¯s latest measures may signal an easing of the crackdown, the policy priorities of ensuring social stability and national security remain unchanged. China¡¯s economic woes are now multiplying, putting pressure on Xi to rebuild support in the private sector. In a downside scenario ¡ª with a sharper property slump, slow pace of reforms and more dramatic US-China decoupling ¡ª Bloomberg Economics sees China¡¯s economic growth decelerating to 3% by 2030.

Along with Jack Ma's Ant group, the People¡¯s Bank of China levied fines on several other banks and Tencent Holdings Ltd. Ant and Tencent put out their own statements after the fines, suggesting they¡¯ve largely completed the reforms necessary under the country¡¯s regulations.

Also Read: How This Chinese Billionaire Lost 93% Of His Fortune

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