After a protracted regulatory reform of the company, Ant Group on Saturday unexpectedly announced a share purchase that values the fintech behemoth at $78.54 billion, significantly less than the $315 billion predicted in an abandoned IPO in 2020.

The announcement came the day after Ant was hit with a $984 million punishment, which should put an end to years of regulatory turmoil at the company and be a significant step towards the conclusion of the country’s internet industry crackdown.

An offer to repurchase up to 7.6% of its stock holding at a price that corresponds to a group valuation of roughly 567.1 billion yuan ($78.54 billion) has been made by Ant to all of its shareholders, the company claimed.

That amounts to a significant 75% discount from the projected $315 billion valuation in 2020 for what would have been the biggest IPO ever had Chinese regulators not abruptly put a stop to it.

“The repurchased shares will be transferred into Ant Group’s employee incentive plans to attract talents. The repurchase proposal will also provide a liquidity option for the company’s investors,” it said.

The business also stated that Hangzhou Junhan Equity Investment Partnership and Hangzhou Junao Equity Investment Partnership, two of Ant’s largest shareholders, have freely chosen not to take part in the repurchase.

On behalf of Ant’s management and staff, Hangzhou Junhan and Hangzhou Junao combined hold more than 50% of the company’s shares.

“While Ant buys back shares at a valuation much lower than the $150 billion figure in the company’s last fundraising round in 2018, the plan provides some liquidity to its existing investors,” said Zhang Zihua, chief investment officer at Beijing Yunyi Asset Management which is an investor of Ant’s affiliate, e-commerce titan Alibaba.

“Liquidity might be more important than valuation for some investors that look to exit.”

He said that neither he nor the markets had anticipated the share buyback as of yet.

China’s central bank announced on Friday that Ant and its subsidiaries would be fined a total of 7.12 billion yuan by financial authorities.

The implementation of the fine is thought to have opened the door for the company to obtain a financial holding company licence, concentrate on fostering growth, and eventually relaunch its intentions for a stock market listing.

“China needs to resolve the Ant IPO to restore investor confidence,” said Wang Qi, chief executive of China-focused asset manager MegaTrust Investment.

“Any progress here not only benefits Alibaba, but is also good for the internet and fintech industries as a whole.”

Jack Ma, a multibillionaire, founded Ant, which runs companies that include consumer loans, insurance product distribution, and China’s most popular mobile payment app, Alipay.

In April 2021, Ant began a massive business restructuring that involved reorganising as a financial holding company, putting it under the same regulations and capital requirements as banks.

Ant’s fine represents a significant step towards the end of China’s brutal crackdown on private enterprises, which began with the cancellation of Ant’s IPO in late 2020 and resulted in the market value of multiple companies being reduced by billions.

Some of Ant’s international investors reduced their valuation of the company after the forced restructuring and cancellation of the IPO, with Fidelity decreasing it to $68 billion in mid-2021, according to Reuters.

“The buyback price is higher than the valuations made by many institutions internally … so I believe that some institutions will choose to participate in the buyback,” said Hanyang Wang, an analyst at 86Research.

“At the same time, initiating a stock buyback also indirectly informs investors that the possibility of a short-term IPO recovery is unlikely.”

Additionally, two Chinese banks, an insurance, and Tencent Holdings’ online payment service Tenpay were also hit with fines by Chinese authorities on Friday.

The majority of the notable issues affecting platform companies’ financial operations, according to the People’s Bank of China (PBOC), have been resolved. Regulators will now turn their attention away from particular companies and towards the routine general regulation of the sector.

(Adapted from Reuters.com)