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Political ties led China to block Jack Mas’ record IPO

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According to a media report, investment firms linked to former Communist Party members and their families stand to gain from the IPO.

Chinese President Xi Jinping has lobbied to block what would have been a record-breaking initial public offering (IPO) for billionaire Jack Mas Ant Group last year due to political families linked to the Communist Party who would make billions of dollars from it to opaque investment vehicles, according to a new report.

Investment firms linked to former President Jiang Zemin’s grandson and former Politburo Standing Committee member Jia Qinglin’s son-in-law profited from the IPO, the the Wall Street newspaper Reported Wednesday, with their ownership in the Ant Group, the financial payments arm of Mr. Mas Alibaba’s empire, owned by “layers of opaque investment vehicles that hold stakes in the company.

The report describes them as “a coterie of well-connected Chinese actors, some of whom have ties to political families that present a potential challenge to President Xi and his entourage.

Among them, Boyu Capital, a private equity firm founded by Mr. Jiang’s grandson, Jiang Zhicheng. Another is Li Botan, who controls the Beijing Zhaode Group, which has invested in Ant through three tiers of investment vehicles, according to the report. Mr. Li is the son-in-law of Jia Qinglin, a senior executive who served on the Politburo standing committee for ten years until 2012 and is close to Mr. Jiang.

Since taking office in November 2012, Xi has mounted a massive anti-corruption campaign that has trapped hundreds of senior officials. As many Red families leverage their connections to acquire multibillion-dollar stakes in China’s biggest companies, Xi called on officials to build a barrier against special privileges to prevent them- themselves and those around them to abuse power, seeing it as a threat to the legitimacy of the party.

Investment vehicles linked to families linked to the party, according to the the Wall Street newspaper, added to other executives’ concerns about Ant Group’s IPO. The last-minute suspension in early November of the $ 35 billion IPO of the Ant Group, which is the financial arm of Alibabas and behind Alipay, China’s largest digital payments company, has sparked intense speculation on Mr. Ma’s fate, but subsequent reports said he is working with regulators to address their concerns.

In December, the State Administration for Market Regulation (SAMR) said it had launched an investigation into Alibabas’ alleged monopoly acts, including “forcing traders to choose a platform between two competitors. Financial risks were cited as a concern, with the group emerging as a lender to millions of small businesses, and operating, like other fintech companies, without some of the capital requirements that apply to banks. The ants’ access to tons of data on consumer credit was also under the target, seen as giving it an unfair advantage.

The People’s Bank of China – the central bank of China – has said it has, with the banking and insurance regulator and the securities regulator, talks with the Ant Group to “implement financial regulatory requirements , maintain fair competition and protect the legitimate rights of consumers. Reports earlier this month said regulators and the group were close to agreeing on a restructuring plan, which would place all of Ants’ businesses in a financial holding company and subject it to requirements applicable to banks.

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