Key investors opt out of Ant’s Buyback

Several prominent global investors, including Warburg Pincus and Canada Pension Plan Investment Board, have chosen not to participate in Ant Group Co.’s proposed share buyback. This decision comes after the valuation of the Chinese fintech was drastically reduced by over 70%, as per sources familiar with the matter.

Notably, Carlyle Group Inc. and GIC Pte, along with other major foreign shareholders, are also declining to engage in the buyback, as these sources reported. On the other hand, some money managers, such as Fidelity Investments and T. Rowe Price Group Inc., have agreed to sell their shares, one of the sources revealed.

Investors who were involved in Ant’s early funding rounds in 2018, including pension funds and private equity firms, are facing significant financial losses due to the share buyback. The company’s value declined significantly following the cancellation of its initial public offering in 2020. While asset managers are required to assess private assets based on market prices for fair valuation, any losses incurred would be on paper and could potentially be reversed if Ant makes a recovery.

Ant Group, backed by 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 been entangled in a regulatory crackdown over the past few years. The valuation for the repurchase is approximately 567.1 billion yuan ($79 billion), a sharp drop from the estimated $280 billion market capitalisation before the planned IPO.

The challenge for global funds lies in evaluating their Ant investments, made around five years ago when the company was valued at roughly $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 already adjusted its estimated valuation for Ant to around $63.8 billion in November.

While some Chinese state-owned shareholders who invested during Ant’s early funding rounds are planning to participate in the buyback, regulators in China have been cracking down on the technology sector for over two years, resulting in substantial fines for companies like Ant and Tencent Holdings Ltd. Ant is reportedly preparing to separate its international business, blockchain, and database management services.

Alibaba Group Holding Ltd., a major shareholder, has decided not to sell any of its one-third stake in Ant. Temasek has indicated that it seeks a better understanding of the basis for Ant’s repurchase valuation.