Fidelity cuts Ant valuation again as China crackdown intensifies

[HONG KONG] Fidelity Investments has slashed its estimate of Ant Group's valuation for at least the second time this year, underscoring the deteriorating outlook for Jack Ma's fintech giant as the Chinese government ramps up regulation of the industry.

The Boston-based money manager's valuation of its Ant holdings at the end of June implied a total market capitalisation of about US$78 billion, according to regulatory filings compiled by Bloomberg. That's down from US$144 billion in February and US$235 billion just before Ant's initial public offering was abruptly suspended by regulators in early November.

Another filing shows Fidelity may have reduced its valuation even further in July, to about US$67 billion. The limited scope of that month's disclosure makes it difficult to know whether the drop reflected a valuation cut or a change in fund holdings. Representatives at Fidelity and Ant declined to comment.

The future of Mr Ma's company has been shrouded in uncertainty as Chinese regulators increase scrutiny of the country's billionaires, sort through details of a fintech industry overhaul and implement new rules on data security and IPOs. Ant, which named a new chief executive officer in March, has committed to drastically revamping its business.

The last-minute scuttling of the company's IPO ten months ago marked the start of a sweeping campaign by Xi Jinping's government to rein in China's free-wheeling private sector, particularly data-hungry tech behemoths like Ant that had attracted billions of dollars from foreign money managers.

While Beijing has tried in recent days to reassure investors of its commitment to supporting private businesses, few expect authorities to approve a revival of Ant's IPO plans anytime soon.

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Ant is still waiting for an official sign-off on its government-mandated transformation into a financial holding company, a structure that will dramatically increase its capital requirements and restrain its ability to grow.

Authorities have ordered Ant to open its payments app to competitors and improve data protections. The company will also need to reduce the size of its main money-market fund - once the world's largest - and sever some ties between its payments platform and other financial services.

Fidelity's valuation for Ant in June was 48 per cent lower than when it invested in the company in 2018. Other big investors include Warburg Pincus, Carlyle Group and Temasek Holdings.

BLOOMBERG