As China’s $984 million sentence for Ant Group was perceived as the end of a regulatory crackdown on the country’s technology sector, shares of Alibaba Group and Tencent increased in Hong Kong on Monday.

An up to $6 billion share repurchase was announced by Ant, an Alibaba affiliate created by Jack Ma on Friday in response to the punishment. This valuation for the fintech company is 75% lower than that of an abandoned initial public offering (IPO), but it is considered as giving investors liquidity and assurance.

The abrupt cancellation of Ant’s IPO in late 2020 signalled the beginning of Beijing’s broad crackdown on sectors ranging from technology to education, as regulators moved to establish their control over what they perceived to be excesses and unethical behaviour coming from years of rapid expansion.

The monitoring created an uncertain atmosphere that caused billions in share price losses and caught companies like Tencent, Meituan (3690.HK), and online retailer Alibaba in its net.

Alibaba’s Hong Kong-listed shares ended the day up 3.2%, outpacing the benchmark Hang Seng index’s 0.6% gain. Tencent gained 0.7% at the closing bell.

According to Daniel Tu, founder of Active Creation Capital, Beijing’s decision to resolve penalties and unresolved issues with Ant and other tech companies comes as China’s economy “is challenged by a weak recovery” and is intended to assuage investor concerns as well as commitments to openly support private sector growth.

Along with Ant, Tencent’s online payment service Tenpay received a nearly 3 billion yuan ($414.88 million) penalties from the Chinese government for issues such client data management.

The majority of the major issues affecting platform companies’ financial enterprises have been resolved, according to the People’s Bank of China (PBOC), which stated this on Friday. Regulators will now concentrate on the general regulation of the industry rather than on individual companies.

“We view this announcement a key milestone for a regular, clear and visible regulatory environment for China’s internet companies,” Huatai Research analysts wrote in a note to clients.

Alibaba, which owns a 33% interest in Ant and spun it off 12 years ago, said on Sunday that it was debating whether to take part in the buyback that would convert shares into an employee incentive plan.

Hangzhou Junhan Equity Investment Partnership and Hangzhou Junao Equity Investment Partnership, two of Ant’s largest shareholders, who combined hold more than 50% of the company’s shares on behalf of the company’s executives and employees, announced they will not take part in the repurchase.

During the third round of fund raising in 2018, foreign investors invested in Ant.

An offer to repurchase up to 7.6% of its stock holding at a price equivalent to a valuation of around $78.5 billion was made by Ant on Saturday.

This contrasted with the $315 billion valuation in 2020 for what was anticipated to be the largest IPO ever, but was ultimately scrapped by Chinese regulators.

One of the first chances for Ant investors who took part in three investment rounds between 2015 and 2018 to exit the firm will be the buyback.

According to the 2020 IPO prospectus, China Life Insurance, Zhifu (Shanghai) Investment Centre, the National Council for Social Security Fund, and Ant’s top onshore investors were these institutions.

The PBOC stated on Friday as it imposed one of the highest fines ever for a Chinese internet company that Ant and its subsidiaries had broken rules and regulations in areas like corporate governance, financial consumer protection, and anti-money laundering requirements.

The completed fine may enable Ant to obtain a licencing as a financial holding company, accelerate its expansion, and ultimately resurrect its intentions for a stock market offering.

Analysts doubt that Ant will proceed with a listing anytime soon, though.

“According to the company, the reason for the buyback is providing liquidity to existing investors and attracting and retaining talented individuals through employee incentives,” said Oshadhi Kumarasiri, a LightStream Research analyst who publishes on Smartkarma.

\”Ant could have achieved both these objectives through an IPO … This means IPO is essentially put on hold.”

(Adapted from ThePrint.in)