Alibaba Stock Rises on Report About Ant’s Holding Company Bid

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Shares of e-commerce giant

Alibaba Group Holding

(ticker: BABA) are rising on a report that China has agreed to allow Ant Group to establish a financial holding company, creating a path for Ant to resuscitate its plan for a public listing.

Alibaba

is up about 1% to $102.41 in early Friday trading. Shares had gained as much as 11.1% today. The stock is up 8.1% in the past month but is still down 12.6% so far this year. Ant is an affiliate company of Alibaba.

According to a Reuters report, which cited unidentified sources, the People’s Bank of China has accepted Ant’s application to form a financial holding company, which suggests a relaxation of the regulatory pressure that forced Ant to restructure and scrap an IPO it had planned for November 2020.

Investors had committed more than $30 billion to Ant but Alibaba co-founder Jack Ma publicly criticized government financial regulations, sparking the ire of senior political leaders in Beijing.

Chinese President Xi Jinping personally decided to stop Ant’s IPO, according to a Wall Street Journal report at the time. Ant has collaborated with regulators on a broad remodeling since. It was valued as a tech company before its scrapped IPO but its transition to a financial holding firm subjects it to capital requirements and bank-like regulations, according to Reuters. 

Representatives from Alibaba and the People’s Bank of China did not immediately respond to Barron’s requests for comment. 

Ant, headquartered in Hangzhou, China, operates the popular digital payment service Alipay. Morning Consult’s survey of the world’s most trusted brands, released earlier this week, said Alipay was the most trusted brand in China.

As of April, 53% of Chinese consumers reported using the app daily, and the Ant website says the service has about 1.3 billion users. Alipay, which launched in 2009, is consumers’ main mobile-payments option alongside top competitor WeChat Pay, which is owned by

Tencent Holdings

(700.Hong Kong).

Ant was one of the first companies affected by the Chinese government’s regulatory crackdown on big technology corporations in the fall of 2020. But in recent weeks, investors have reacted favorably to signals that regulations and tight supervision are easing.

Exchange-traded funds including

iShares MSCI China
(MCHI),

KraneShares CSI China
ETF (KWEB) and

Invesco China Technology
(CQQQ) have gained 6%, 12.6%, and 9% in the past month, respectively.