Ant Group CEO Simon Hu has unexpectedly resigned, according to sources at Bloomberg, as the financial services giant grapples with a regulatory crackdown from the Chinese government.
Simon Hu unexpectedly resigned as chief executive of Ant Group Co., adding further turmoil for the fintech giant as it grapples with demands from the Chinese government to overhaul its business.
Hu resigned for personal reasons, also resigning from his role as an executive director on the company’s board of directors, said a person familiar with the matter, who asked not to be identified because the information is not. public. Eric Jing, already chairman of Ant, will also become CEO immediately, the person said. A spokesperson for Ant, founded by billionaire Jack Ma, confirmed Hu’s resignation.
Hu, 51, joined Ma’s Alibaba Group Holding Ltd. in 2005 after working at China Construction Bank, the country’s second largest lender. He was known for deploying innovations such as using data analytics to deliver unsecured finance services to small businesses and helping Alibaba beat Amazon.com Inc. to grow Asia’s largest cloud business. .
Hu moved from Alibaba to Ant in November 2018 as chairman, and took over as CEO in December 2019. He will focus on charitable work at Ant and Alibaba in the future, the familiar person said. Alibaba owns about a third of Ant.
Billionaire Ma’s financial giant has been at the center of a crackdown as China aims to push tech companies into finance. Its $ 35 billion IPO was abruptly suspended in November, with authorities citing a change in the regulatory environment. Ant, along with his peers, has been hit by a wave of new rules aimed at limiting their influence in everything from digital payments to online loans and credit reporting.
“Simon’s entry and departure from Ant were both closely tied to the IPO,” said Michael Norris, director of research and strategy at the Shanghai-based consultancy. “His departure casts a cloud over the timeline of the list.”
Ant and Chinese regulators have agreed to a restructuring plan that will turn the Hangzhou-based company into a financial holding company, subjecting it to capital requirements similar to banks, people familiar with it said. The change would also subject it to scrutiny of ownership and the need to apply for new licenses.
With so much work to do and some rules yet to be set out, Ant’s initial public offering may not go through until 2022, said regulators familiar with the matter. The company’s valuation could drop about 60% from the $ 280 billion it was pegged to last year, Bloomberg Intelligence analyst Francis Chan estimated.
Hu’s resignation comes days after Chinese Premier Li Keqiang pledged in the National People’s Congress to expand financial technology oversight. The fintech sector needs to be developed in a “cautious” manner and China aims to create a “gap correction” mechanism to correct and suspend innovative financial products when needed, according to a plan covering its policies for 2021 to 2025.
The country’s three financial watchdogs have made it their main goal this year to curb the “reckless” push by tech companies into finance. Ant rival Tencent Holdings Ltd. is seen as the next target for increased surveillance, people familiar with it said. It will also likely be forced to create a holding company for its financial operations, with the two companies setting a precedent for other fintech players by complying with stricter regulations.
Hu was tasked with helping Ant expand beyond finance into digital lifestyle services. In a June 2020 interview with Bloomberg, Hu said he wanted to accelerate Alipay’s evolution into an online mall for everything from travel loans and services to food delivery.
The plan at the time was to aggressively pitch Ant’s digital payment and cloud offerings to local neighborhood services and merchant branches, including KFC Holding Co. and Marriott International Inc., broadening its focus from banks and fund managers on its ubiquitous Alipay app.
China’s regulatory crackdown and orders for Ant to become a financial holding company will reduce those aspirations as the company is more regulated like a bank.
(Updates with commentary in the sixth paragraph and more details)