Facing discontent among employees, Ant Group Co.’s leader said the Chinese financial-technology giant would eventually go public and that the company would look for ways to help workers monetize some of their shares.
In a lengthy post on Ant’s internal website, Executive Chairman Eric Jing said the company’s management is reviewing its remuneration and incentive policy and working on a “short-term liquidity solution” for employees that would take effect in April, according to people who saw his message. Mr. Jing was responding to an employee who had asked about Ant’s future and how the company plans to retain talent.
The liquidity solution Ant is working on will likely be a program to buy back some of the employees’ shares, according to people close to the firm. April is typically the month when Ant awards discretionary annual bonuses to employees.
Employee morale has been low at Ant since Chinese regulators forced the company to call off its blockbuster initial public offerings in Hong Kong and Shanghai in early November.
Many of Ant’s 16,000-plus workers had received share-based compensation, and they were on the cusp of reaping a windfall from Ant’s listing, which had valued the company at more than $300 billion last fall. That represented a doubling in Ant’s valuation from mid-2018, when its last round of private fundraising valued the company at $150 billion.
Instead, the owner of popular payments network Alipay has been forced to restructure its business, dial back riskier activities and fall fully in line with financial regulations that are likely to crimp its growth and profitability. Investors and analysts expect Ant to have a lower valuation as a result, and the company is planning to overhaul its business into a financial-holding company that would be overseen by China’s central bank.
“The company will certainly become a public company. I’m always fully confident in that,” Mr. Jing wrote, while stressing that the priority now is rectifying businesses in accordance with regulatory requirements. It was the first time Ant’s senior management broadly addressed employees and their concerns about the company’s future since the listing was shelved.
Ant, whose controlling shareholder is billionaire Jack Ma, has been in close discussion with regulators over the rectification plan, which will address such issues as corporate governance, setting up a financial holding company and the payment businesses, Mr. Jing said without elaborating, according to the people who saw his post.
“Ant will not be weakened by the rectification, but will chart a healthier and greater development path,” he said.
Ant, formerly known as Ant Financial Services Group, was established in 2014 to house the payment business of e-commerce giant Alibaba Group Holding Ltd. Since then, Ant has been paying some compensation in the form of share-based awards tied to its valuation.
These awards, known as share economic rights, restricted share units and share-appreciation rights, are typically handed out to mid-to-senior new hires and existing employees who meet certain performance targets. They have a detailed vesting schedule that in many cases lasts for four years, according to Ant’s IPO prospectus. The awards incentivized many individuals to join Ant and stay with the company, as they carried the promise of substantial upside.
From 2017 to June 2020, Ant paid out 15 billion yuan in share-based compensation, according to its prospectus, equivalent to $2.3 billion at current exchange rates. Such awards represented 3% to 5% of the company’s revenue over the various periods.
In Ant’s previous private fundraising rounds, the company gave employees the opportunity to cash out of some of their share-based awards based on the valuations Ant earned, according to people familiar with the matter. Outside of those windows, staffers generally could only sell their holdings when they quit, or wait till the company is public.
In Ant’s last fundraising round in mid-2018, the company was minted as the world’s most valuable startup with a valuation of $150 billion. After that, some employees and new hires were awarded restricted share units with purchase prices per share capped at 35.28 yuan—in line with the 2018 valuation.
Employees stood to reap a substantial paper gain last fall when Ant was geared to list on the Shanghai Stock Exchange at 68.80 yuan a share, equivalent to $10.64 at current exchange rates, although they faced a three-year lockup period after the listing.
Chinese regulators pulled the IPO just two days before a historic dual-listing in Shanghai and Hong Kong. The decision was signed off by President Xi Jinping, after Mr. Ma made a speech that rankled financial regulators, The Wall Street Journal previously reported.
“The suspension of the IPO is undoubtedly a major test and challenge to our staff,” Mr. Jing said in his reply, according to the people. “In the space of a second, the Ant team went from IPO preparation to major emergency response, calmly dealing with many unimaginable difficulties,” he said, adding that he is proud of the team.
Mr. Jing said the company will advance its development strategy as it restructures and makes adjustments to its business this year, and will provide more details in due course.
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