Ma Is In Beijing & "Seems Quite Happy"
(CapitalWatch, Sept. 7, Hong Kong) Where is Jack Ma? That's the question frequently asked by investors. After last seen on Jan. 20 this year during a live video chat with rural educators, Jack Ma was reportedly spotted playing golf at Sun Valley Golf Resort in Hainan on Feb. 11, although others have said that he was on detention. With the news of Ma's appearance in Hainan, shares in Alibaba Group (NYSE: BABA; HKEX: 9988) catapulted at the time to HK$269 apiece, now the highest level this year.
The presence of Jack Ma is essential to Alibaba's stock price. "He is now in Beijing. He seems quite happy," as one of Ma's business partners at Yunfeng Capital told CapitalWatch exclusively last week. "He still keeps in touch with his business partner."
Ma has frequently flown to Beijing early this year. The market interpreted this as Ma is "not out of the business circle yet." However, our source said that Ma has been monitored by the authorities. "When and where he can show up is under control, because his appearance can move the stock price," said the source, implying that Alibaba's stock is under state control to a certain extent.
Fallout After Ant Group IPO Cancellation
Alibaba was like a superstar in investors' eyes with the sky-high valuation of the fintech giant--- Ant Group. "The roadshow of Ant Group IPO was so hot, and it was hard to get access to its subscription. So, I rather gave up," a Hong Kong investor said after his private banker told him it was hard to get the shares unless you were the anchor investor. However, Ant's IPO was abruptly called off in November 2020. A storm followed.
And it wasn't just Ma, whose whereabouts were shrouded in secrecy. On the evening of Aug. 21, Jiangyong Zhou, Chief Secretary of the Hangzhou Municipal Party Committee of the Communist Party of China, came under investigation for serious violations of discipline and law related to Ant's IPO. On Aug. 19, Xiaohui Ma, Deputy Party Secretary of the Standing Committee of the Zhejiang Provincial People's Congress, voluntarily surrendered to the authority.
Minchun Hu, a Ningbo lawyer, reported to the government that Zhou's family spent 500 million yuan to subscribe to Ant's shares and was refunded 520 million yuan when the IPO was suspended. Many other parties in Zhejiang were also involved in Ant's IPO. Ant Group denied the rumors.
Secretary Zhou & His Family Network
Zhou was born in Ningbo, Zhejiang. He began his political career in December 1988 as a member of the standing committee of the YinZhou Committee of the Communist Youth League of China. In January 2001, he became vice magistrate of YinZhou.
Whether a family member of Zhou has a close
relationship with Ant Group may influence the fate of Ant Group. A guy named
Wenyong Zhou owns a car company and has sold cars to different Ningbo
government units. He later founded a petrochemical company. With the
recommendation of the Technology Department in Yinzhou, his company received 80 million yuan in venture capital from Softbank China in 2010. Softbank is the
largest shareholder of Alibaba.
Jianyong Zhou, believed to be Zhou's younger brother, is a Ningbo businessman who owns Youcheng Joint Information Technology Development Co. (Youcheng). It specializes in big data of China's metro system, with clients including Alibaba and Tencent (HKEX: 0700; OTC: TCEHY) since 2016. According to Ant's prospectus, Shanghai Yunxin was established in 2014 and was 100% owned by Ant group specializing in strategic investment and investment management.
Shanghai Yunxin has invested in Youcheng and became the second-largest shareholder of Youcheng holding 14%. Jianyong Zhou then set up a new technology company called Hangzhou Metro Youcheng (Zhejiang) Technology Ltd. with Hangzhou Metro Group in December 2019, with registered capital of up to 10 million yuan. Ant Group was its third-largest shareholder.
Although the relationship between Jiangyong Zhou, Wenyong Zhou, and Jianyong Zhou is unclear, it is suspected that they are from the same family and have an important role in Ningbo.
Qian Duoduo & Ant Group
Coincidentally, Fenglei Qian, a buddy of Jack Ma, who plays a very significant role in Ant Group, was also born in YinZhou, the key political ladder in Zhou's circle. In his early stage, Qian owned a small fashion shop in YinZhou. Soon after he became a betting broker in Macau, he dabbled in real estate almost overnight.
This Ningbo businessman got rich mysteriously and became high-profile. Whenever he does charity or buys a car, he spends a huge amount of money. His nickname became "Qian Duoduo", which means "lots of money" in Chinese. In 2014, Qian stepped into the finance industry and his close relationship with Jack Ma was well known among mainland tycoons in Hong Kong. When Alibaba went public in the United States in 2014, Qian attended its listing ceremony at the New York Stock Exchange.
Qian and Ma then moved their base to Hong Kong. In 2014, as a Director of Universal International Holdings (Hong Kong), Qian bought a house for HK$690 million ($80 million) at No. 25 Baker Road on the Peak, the residential area for Hong Kong tycoons. Qian has a Hong Kong ID card and the property is under his name only. In 2015, Ma became his neighbor and built a "palace" at No. 22 Baker Road after acquiring the site for a record HK$1.5 billion. They have been seen playing Texas Hold'em at The Dynasty Club, where Qian and his assistant were stabbed by four men after the suspension of Ant Group's IPO.
The Unwinding of a "Complicated" Deal
Ant Group's financing was by invitation only. Institutions were selected based on criteria such as long-term relationships, business collaboration, and strategic support. According to the prospectus, Shanghai Zhongfu, Shanghai Qihong, Shanghai Qizhan, Shanghai Yunfeng Xincheng, Shanghai Jingyi, and five limited partnerships are all designated by Shanghai Yunfeng Xinchuang as the fund managers, holding 4.27% of Ant's shares. By scrutinizing the partners of the above institutions, one can find the footprint of not only Fenglei Qian, but also Gouju Shen, the chairman of Intime Retail, a very famous Ningbo businessman, and some other Ningbo companies.
After the suspension of Ant Group's IPO, its valuation shrank more than two-thirds, from $315 billion to around $100 billion. It is treated and regulated now as a financial holding company rather than a bank. Just like when a casino suddenly collapses, the betting brokers should return all money with interest, plus the amount for the breach of contract.
A source in the real estate market told CQ that Qian wanted to sell his Baker Road house last year. However, with the slowdown of the Hong Kong luxury house market, it has not been sold yet. According to the land registry record in Hong Kong, Qian had applied for a mortgage with Hang Seng Bank in January this year with this house.
Along with the stepdown of Hangzhou officials, Alibaba's stock fell to a 52-week low of HK$151.20. Whether Jiangyong Zhou or his family members subscribed to Ant's shares directly or through the five strategic placement funds, it seems not to be Ant's responsibility to check who bought the funds; however, given how arbitrary that the political power can be applied here, there is still something worth keeping an eye on.
The Spill Effect of Bad Publicity
Ant Group's ties to the investigation into Zhou isn't the only controversy facing Ma's business empire.
Last month, an Alibaba employee said in a post on an internal forum that she has been sexually assaulted by a former manager. Earlier, she made a public announcement in a company cafeteria. Both the video of the announcement and the employee's post were leaked and went viral. The incident sparked debates about sexism and the workplace culture both within Alibaba and generally in China.
The accused manager was fired, two senior executives resigned, and the company fired 10 employees who shared the post for violating rules about leaking content from the private company platform.
Alibaba's CEO Daniel Zhang called the company's handling of the case "a humiliation." Alibaba reprimanded its head of human resources and established a hotline for sexual harassment complaints as well as a committee to resolve such disputes.
It is hard to imagine a tech giant as omnipotent and omnipresent as Alibaba would fall victim to such a public "shaming" campaign in China—if not for some deep-rooted scandals or issues. Given how unpromising Alibaba's stock has been lately, and given the fact that the public face of China's e-commerce revolution is still MIA (missing in action), veteran investors may better prepare for a long haul.
[Grace Lieberman contributed to this article]