Echo Buzz: The Fall of an Empire- What Happened to Jack Ma?

Jack Ma as he gave a speech at Bund Summit in Shanghai on 24 October 2020.  source

In China, Jack Ma is synonymous with success. The former english teacher turned internet entrepreneur was the country’s richest person. $61.7Billion. That was Jack Ma’s estimated net worth according to Forbes. He topped Forbes China’s rich list for 2020 and ranked number 17 in the global Billionaires list for 2020. Ma co-founded the behemoth Alibaba group, a multinational technology conglomerate and also China’s largest company, in 1999. It is the closest thing Amazon has to peer and rival. Besides that, Ma created Alipay, a third party mobile and online payment platform in 2003. Growth of Alipay was rapid. In 2005, it attracted the American Internet portal, Yahoo!, which bought a 40% stake. In 2007, Alibaba.com raised $1.7 billion dollars in its initial public offering (IPO) in Hong Kong. Not long later, Ma created Ant group, which serves as a parent group of Alipay and other financial services. In 2020, it was scheduled for an IPO. 

That life has translated to a rock star life for ‘Papa Ma’ as many people on the internet called him.  For China’s young and ambitious, “Papa Ma’s” story is one to emulate. 

Alibaba group. source

However, tables have turned. On October 24th  2020, when Ant group was gearing up for an IPO, Ma criticised China’s financial regulatory system, saying China was following the global rules that are part of the “old people’s hub”. In other words, the rules that govern global banking are not suited for Chinese tech innovation. He said: “we can’t use yesterday’s method to regulate the future.” He also added: “Chinese banks operated with a pawnshop mentality”. 

While Ma might have not realised the outcome of his brutal words, people close to him were baffled about the tone of speech he intended to deliver, according to 2 sources close to Ma. It was a speech that had triggered the Chinese government, Xi Jinping and many other government and financial officials. It was a speech that was like a direct punch in their faces. 

This had resulted in a chain of unprecedented events that ultimately torpedoed the listing of Ant. Strung by the attack, Chinese regulators and communist party officials had decided to conduct an antitrust investigation on Alibaba, the powerhouse e-commerce company he co-founded, and to suspend the IPO just 2 days before Ant group will hit a new record of $37 billion deal. This has prompted the company to freeze Hong Kong’s leg to dual listing. Subsequently, Ma had lost $11 billion in just a few months, dropping his net worth to $50.6 billion. At the same time, the government watchdogs, banks and officials are continuing to circle Ant group, the juggernaut Fintech group as they keep a close scrutiny on capital adequacy and leverage ratios. It was a careless yet exorbitant mistake for Mr. Ma. 

“He has limitations. That is President Xi. He is not going to win that war”

The [Communist] Party is trying to make it clear that Ma is not bigger than the party,” says Rana Mitter, a professor specializing in Chinese politics at Oxford University. “But they also want to show that China is a good place to do business, and that means that the party needs to show that entrepreneurs can succeed.”

The crackdown of  Ma’s businesses had resulted in Alibaba to lose more than a quarter of their value on 24th October. It wiped more than $10 billion from his fortune, and displaced him into second place on China’s richest people with an estimated $49 billion, according to the Bloomberg billionaire index. The wealthiest person is now Pony Ma (no relation), the chairman and chief executive officer of the rival tech firm, Tenacent. 

The chance for floatation getting back on track is near slim, as regulators look to tighten the scrutiny of the company. No listing is expected for the next few months. As part of this drive, the regulatory officials rushed to publish a consultation paper to tighten rules for the country’s micro-lending business, which directly impacts Ant. The draft requires micro-lenders to fund at least 30% of loans they fund jointly with the banks. Only 2% of loans Ant had facilitated as of end-June were on its Balance sheet, its IPO prospectus showed. China’s security watchdog subsequently said the regulatory changes could have a major impact on Ant’s business structure and profit model as well as fellow entrepreneurs to tone down the swagger. There are also new guidelines to grapple with for some large conglomerates like Ant involved in finance as well as online lenders and insurers. The suspension marked the nadir of what has been a gradually souring relationship over recent years between Ma’s corporate empire and Chinese regulators, from the central bank to the internet and markets watchdogs.

After the announcement, however, Ant released a statement in which it pledged to “embrace” regulation.

Alibaba and Ant group are left with no other options but to comply. “Ma’s hubris has now morphed into humility.” 

Written by: Ashlynn

Edited by: Pei Zoe

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