Alibaba, Ant Financial Affiliate Move To Disentangle Operations To Avoid Further Regulatory Backlash

The ramification of the protracted battle with Chinese regulators has continued to pressure Alibaba Group Holdings, Inc. BABA and Ant Financial, two of the biggest Jack Ma-founded companies.

The two are reportedly eyeing to disentangle their operations from each other in a bid to stave off any potential regulatory threat.

What Happened: Alibaba and Ant have commenced unwinding some of their collaborative ventures and arrangements as the duo looks to bounce back from the damage inflicted by regulatory challenges, Reuters reported, citing sources familiar with the matter.

Ant, a fintech company, was spun-off from Alibaba in 2011, and the ecommerce giant currently has a 33% stake in the former. The duo also have some shared leadership, the report said.

Related Link: Here's The Bull, Bear Case For Alibaba Stock As Market Looks To Bounce

The two companies have begun restricting each other's services, compete for clients and also forge partnerships with rivals, Reuters said. Ant's decision to disengage from Alibaba has to do with its overseas expansion plans, the report said. Alibaba, for its part, is reportedly working on a cross-border transaction tool that would rival Ant.

Why It's Important: Ant was forced to shelve a $37 billion initial public offering in China in late 2020 after regulators blocked the proposed plan. Subsequently, the company was required to organize itself as a bank holding company that would bring it under stricter capital requirements and disclosure norms.

Earlier this month, reports suggested the Chinese leadership has given the go ahead for reviving the IPO plans and that Ant could file the preliminary prospectus with the securities regulator as early as the next month. Ant's businesses include the Alipay mobile payment app, which reportedly has over 1 billion users.

In premarket trading Wednesday, U.S.-listed shares of Alibaba were slipping 2.34% to $103.90.