BEIJING (BLOOMBERG) – Jack Ma’s Ant Group plans to offer zero-interest loans to employees who own illiquid stock options, seeking to boost morale after the company’s landmark initial public offering was suspended in November, people familiar with the matter said.
The loans will be backed by eligible employees’ restricted stock options, which will be valued at levels calculated after a 2018 funding round, the people said, asking not to be identified discussing private information. That will allow Ant to give staff access to liquidity without requiring the company to establish a more up-to-date valuation for its shares.
The options, known as Share Economic Rights (SERs)with each representing 5.53 shares, will be priced at 195 yuan (S$39.88) or 35.26 yuan a share, in line with an internal buyback price from 2018, the people said. Ant was valued at US$150 billion (S$198.8 billion) at the time.
Ant’s executives are trying to halt a potential exodus of staff, who had expected a windfall with the company just days away from listing in Shanghai at a US$280 billion valuation. Chairman Eric Jing assured employees in March that the firm would eventually go public and promised a “short-term liquidity solution” that would take effect this month.
Details of the loan programme will probably be announced in the next few days, the people said. Ant declined to comment via email.
The company suspended its share buyback programme for current and departing staff last year to prepare for its IPO. It needs to compete for talent with China’s other technology behemoths including Tencent Holdings, which saw its shares climb as Ant battles a regulatory overhang.
The future of Jack Ma’s company – and its valuation – has been shrouded in uncertainty as regulators sort through details of a fintech industry overhaul that abruptly halted Ant’s US$35 billion IPO in November. The company has since committed to drastically revamping its business and seen its chief executive officer Simon Hu exit.
Early investor Warburg Pincus marked down the valuation of the fintech giant to a range of US$200 billion to US$250 billion at year end, people familiar have said.
That’s a fall from its peak valuation but better than estimates by Bloomberg Intelligence, which now sees Ant dropping to US$29 billion to US$115 billion after it becomes regulated more like a bank.
Many of Ant’s employees have been granted restricted stock options, which account for a significant portion of total compensation for some employees. These are usually subject to a four-year vesting schedule, with 25 per cent free from the lockup upon the first anniversary and 25 per cent every year thereafter.
Before Ant’s buyback programme was halted, departing employees would sell shares back to the company at a valuation in line with the company’s most-recent funding round, while existing employees could participate in periodic buyback rounds, people familiar with the matter said.
Outstanding SERs totaled 114 million at the end of June, according to the latest data disclosed by Ant. If valued at the company’s planned IPO price in November, they would have been worth a combined 43 billion yuan.