Prominent global investors, including Warburg Pincus and Canada Pension Plan Investment Board, have opted out of participating in Ant Group Co.’s proposed share buyback. This decision follows a significant reduction in the Chinese fintech company’s valuation by more than 70%, according to sources with knowledge of the matter.
Carlyle Group Inc. and GIC Pte, along with other major foreign shareholders, are also reported to be declining involvement in the share buyback. In contrast, some money managers, like Fidelity Investments and T. Rowe Price Group Inc., have agreed to sell their shares, one of the sources disclosed.
Investors who were part of Ant’s early funding rounds in 2018, which included pension funds and private equity firms, are facing substantial financial losses due to the share buyback. The company’s value has significantly declined since the cancellation of its planned initial public offering in 2020. While asset managers must assess private assets based on market prices for fair valuation, these losses could potentially be temporary and reversible if Ant manages to recover.
Ant Group, with backing from Jack Ma, proposed a share buyback of up to 7.6% of its shares last month. This move allowed investors to reduce their exposure to the company, which has faced regulatory scrutiny over the past few years. The repurchase valuation is approximately 567.1 billion yuan ($79 billion), marking a significant drop from the estimated $280 billion market capitalisation before the intended IPO.
The challenge for global funds lies in assessing their Ant investments made around five years ago when the company was valued at around $150 billion. Other overseas backers at that time included Silver Lake Management LLC, Khazanah Nasional Bhd. of Malaysia, and Singapore’s Temasek Holdings Pte. Fidelity had previously adjusted its estimated valuation for Ant to approximately $63.8 billion in November.
While certain Chinese state-owned shareholders that invested during Ant’s early funding rounds plan to participate in the buyback, Chinese regulators have been imposing stricter regulations on the technology sector for over two years. This has resulted in substantial fines for companies like Ant and Tencent Holdings Ltd. Ant is reportedly considering separating its international business, blockchain, and database management services.
Alibaba Group Holding Ltd., a significant shareholder, has decided not to sell any of its one-third stake in Ant. Temasek has expressed the need for a better understanding of the basis for Ant’s repurchase valuation.