Alibaba shares surged on Monday after the e-commerce company said a record $ 2.8 billion (£ 2 billion) fine imposed by Chinese regulators marked the end of an investigation into the company’s anti-competitive practices.
Senior executives at the company, founded by billionaire Jack Ma, told investors that while Chinese regulators are continuing a broader investigation into the sprawling conglomerates of the country’s tech industry, they believe the fine of several billion dollars announced over the weekend marked the end of the focus on Alibaba. The company is listed in Hong Kong and its shares have climbed to 9% following comments from management.
“We are happy to be able to put this issue behind us,” said Joe Tsai, executive vice president of the Alibaba group. “With this sanction decision, we have received good guidance on some of the specific issues falling under the anti-monopoly law. Apart from merger review, we are not aware of any other [antitrust] questions. »
Chinese market regulators fined Alibaba, worth 4% of its domestic revenue in 2019, for preventing traders who use its website from doing business or offering promotions on trading platforms competing electronics. Alibaba said it would spend “billions of dollars” to improve the merchant experience on its site.
While the $ 2.8 billion fine is a record for Chinese regulators, it is also well below the 10% maximum of revenue Alibaba could have faced.
Although Alibaba is no longer the subject of further investigations, it still has to comply with a “full rectification” program as well as a careful review of past mergers and acquisitions.
Alibaba has become the lightning rod for big tech crackdown after Ma, one of China’s most popular, outspoken, and wealthy entrepreneurs, gave a candid speech in 2020 criticizing national regulators for allegedly infuriating the president , Xi Jinping.
After the comments, Chinese regulators blocked the $ 34 billion IPO of online payments subsidiary Alibaba Ant Group, which was said to have been the largest stock offering in history, and Ma disappeared from the stock market. public eye for three months.
Beijing last month ordered Alibaba to sell off some of its media assets, including Hong Kong’s South China Morning Post, as the Chinese government clamped down on growing public influence held by the country’s sprawling tech conglomerates.
In another development on Monday, the Chinese central bank announced that Ant Group would restructure itself as a financial holding company, a move that is expected to dampen its profitability and valuation.
The People’s Bank of China has said that as part of a “comprehensive and achievable restructuring plan,” Ant will sever the “inappropriate” link between payment service Alipay, virtual credit card company Jiebei and the unit. Huabei consumer credit.
The central bank also asked Ant to break its “information monopoly, and strictly adhere to the requirements of commercial credit information regulations.”
The company agreed to improve corporate governance and “rectify illegal financial activities in credit, insurance and wealth management,” the central bank said.
The central bank said it also asked Ant to control its leverage and product risks, control the liquidity risk of its flagship products, and “actively downsize” its huge Yu’E money market fund. Bao.
The measures “set an example” for financial regulation of the platform economy, “the state-backed Economic Daily said.
“Ant Group attaches great importance to the seriousness of the rectification,” the company said.
He added that he plans to start a personal credit reporting business and consolidate his two flagship credit businesses into his consumer credit company.