Alibaba updates

Alibaba’s shares fell sharply on Monday after Beijing publicly accused Ant Group, the e-commerce group’s sister company, of regulatory failures in its recent volley against Jack Ma’s empire.

Pan Gongsheng, the deputy governor of the People’s Bank of China, was posted on the central bank’s website on Sunday and comes as authorities increased pressure on one of China’s richest men to do business.

Alibaba’s shares closed 8 percent lower in Hong Kong, their lowest level since July. PBoC’s reprimand overshadows a move by Alibaba on Monday to increase its two-year share buyback program from $ 6 billion to $ 10 billion.

The company’s shares have fallen more than 25 percent since late October, when Mr. Ma publicly criticized the country’s financial regulators and state-owned banks – roughly $ 260 billion of Alibaba’s market cap. The personal wealth of Mr. Ma, once the richest person in China, has fallen from just under $ 62 billion to $ 49.3 billion, according to Bloomberg data.

Beijing stopped a $ 37 billion initial public offering of Ant Group, Alibaba’s online finance division, after Mr. Ma’s statements. This triggered a cascade of public, state and state criticism of the two companies’ alleged monopoly practices.

China’s market regulator announced last week it would launch an antitrust investigation against Alibaba, while Ant confirmed it was called to meet with the PBoC and three other regulators.

Mr. Pan’s comments, released the day after representatives from PBoC and Ant met in Beijing, have drawn investor attention back to the financial services group. Ant had tried restructuring his business to restart his IPO next year.

However, Mr. Pan’s attack confirmed how discouraging this will be. He said Ant must “go back to the roots” as a payment service provider and “fix” many of its fastest growing and most lucrative consumer credit and asset management businesses. Ant has started this process in the past few weeks, but investors believe it could hurt the company’s valuation if it can get back to the market.

“It will take at least 12 months for regulators to come up with detailed new rules for Ant,” said Ji Shaofeng, a former official with the Chinese Banking and Insurance Commission. “Ant won’t be able to complete its business overhaul until the new regulations are in place.”

Ant’s IPO would have been the largest in the world and valued the company at more than $ 300 billion.

Analysts are unsure whether a reorganization will satisfy regulators or whether Ant will have to sell or close some of its consumer credit operations. The latter has drawn heavy criticism from state banks, who argue that Ant has benefited from looser regulatory oversight.

The parallel move against Alibaba, which is listed in Hong Kong and New York, has further increased the stakes for Mr. Ma, who founded the group more than two decades ago in Hangzhou, capital of east China’s Zhejiang Province.

After the state market regulator announced its Alibaba investigation on Dec. 24, Zhejiang officials confirmed that they interviewed company employees and took materials away from corporate headquarters.

Zheng Shanjie, governor of Zhejiang, said Friday that the investigation was not intended to usher in “winter” for online businesses, but instead to mark a new “starting point” for the sector to develop.

Additional coverage from Xinning Liu and Ryan McMorrow in Beijing

Video: Why Ant’s IPO was canceled

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Is Ma testing the limits of Beijing’s tolerance? / By John de Clef Piñeiro, New York, NY, USA