In November, Ant Group had to cancel its IPO at short notice following pressure from the authorities. It is now clear that the Chinese fintech giant will not attempt a new IPO anytime soon. According to insiders, Alibaba and Ant founder Jack Ma is now planning zero-interest loans for the company’s employees.
In total, it should be about several billion dollars. The measure is supposed to raise the morale at Ant and prevent departures. After all, many long-term employees are currently sitting on stock options that they cannot redeem. Some are likely to have already planned with the proceeds.
With the regulation, the company value has also decreased significantly. Accordingly, the options are worth less. Shortly before going public, Ant had valued more than $ 300 billion in the Hong Kong gray market. This value is likely to have halved at least.
The loans are now to be secured by the employee stock options, which will be valued after a funding round in 2018, reports Bloomberg citing persons who are familiar with the matter. Ant was valued at $ 150 billion at the time.
Ant is one-third owned by Alibaba.
Of course, this is a special case – but it does support a few general principles. In summary: Don’t speculate on credit, just invest the money you have available. Think long-term and do not plan for presumed future profits today. After all, there is no guarantee that everything will always turn out exactly as intended. If you urgently need capital for a major purchase, you may look stupid, while other investors can simply sit out a dry spell or use it to buy more. At least as far as Alibaba itself is concerned, THE SHAREHOLDER assumes that the company value will be significantly higher in a few years than it is today.
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The author holds positions directly on the following financial instruments mentioned in the publication or related derivatives that benefit from any price development resulting from the publication: Alibaba.
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