Jack Ma Emerges as China’s Richest Man Before Alibaba IPOZijing Wu and Sterling Wong
Jack Ma is China’s richest person.
The 49-year-old founder and chairman of Alibaba Group Holding Ltd. has a net worth of $21.8 billion, according to the Bloomberg Billionaires Index. His assets include a 7.3 percent economic interest in China’s largest e-commerce business, which is preparing for what could be the largest initial public offering in U.S. history, and almost half of the parent of Alipay, a separate online-payment service that previously hadn’t been included in his net worth calculation.
Ma is $5.5 billion richer than Ma Huateng, the founder of Tencent Holdings Ltd., China’s largest Internet company by market value. Robin Li, the founder of search engine Baidu Inc., ranks No. 3 in the world’s second-largest economy.
“The wealth creation in China has been quite rapid, particularly among entrepreneurs such as Jack Ma that have created businesses that benefit from China’s burgeoning middle class,” said Tony Hsu, a Shanghai-based portfolio manager at Dalton Investments.
Alibaba, which plans to sell shares on the New York Stock Exchange next month, may set its IPO value at $154 billion, according to the average estimate of five analysts surveyed by Bloomberg in July. Ma owns 8.8 percent of the company. After subtracting the 1.5 percent controlled by SymAsia Foundation Ltd., his charitable organization, Ma’s interest in the company is valued at $11.3 billion.
The same analysts said Alibaba’s post-listing valuation could be as much as $200 billion.
Ma also owns 48.5 percent of Zhejiang Ant Small & Micro Financial, a closely held entity that operates the Alipay online-payment service. The Hangzhou, China-based company has a value of $25 billion, based on the average estimate of seven analysts surveyed by Bloomberg News.
The billionaire’s stake in Small & Micro is expected to dilute to no more than 8.9 percent in three to five years by selling new shares or distributing stock to employees, the company said in an Aug. 12 filing with the U.S. Securities and Exchange Commission. Ma won’t realize any economic benefit from these transactions, the filing said.
Alibaba also is entitled to acquire as much as a third of Small & Micro, according to the filing, though the e-commerce company can’t assure investors it will receive the approval from Chinese regulators for the transaction.
Ma is credited with the full stake in Small & Micro. Six of seven analysts surveyed said his net worth should be calculated based on his current interest and adjusted as his stake changes. Based on the planned dilution of Ma’s holdings, the analysts said the valuation should be discounted by as much as 15 percent, giving his stake a value of $10.3 billion.
Jim Wilkinson, a spokesman for Alibaba, disputed the rationale for giving Ma 48.5 percent of Small & Micro because it eventually will be diluted and the billionaire will receive no personal economic benefit along the way.
Nigel Davis, principal lecturer in the University of Hong Kong’s law department, said Ma’s plan to pare down his stake in the IPO prospectus may not be legally binding because it’s “a statement of future intention, not of current fact.”
Ma’s fortune could increase further once China’s biggest e-commerce company starts trading, RHB Research Institute Sdn.’s Li Yujie said.
“Alibaba is a big name, even in the U.S.,” Li said. “Some of the retail investors and also smaller funds may not have the resources to subscribe to the shares at the IPO, so many of them are waiting to get into the stock after the IPO.”
Ma and his two closest Chinese Internet competitors may be locked in a three-way race to be China’s richest as their stocks move, said Wang Weidong, an analyst at IResearch, a Shanghai-based Internet consulting firm.
Competition may intensify as Tencent and Baidu plan to jointly invest with Dalian Wanda Group, controlled by China’s fourth richest billionaire Wang Jianlin, to set up an e-commerce company, the Wall Street Journal reported yesterday, citing sources it didn’t identify.
“Whether it’s Pony Ma or Jack Ma who becomes China’s richest man depends on whether you favor Tencent or Alibaba,” IResearch’s Wang said, referring to Tencent’s Ma by his nickname. “Baidu is also another strong competitor. So Robin Li also has the same potential to become China’s richest man.”
Alibaba reported yesterday that first-quarter earnings almost tripled to $1.99 billion, while revenue rose 46 percent in local currency to the equivalent of $2.54 billion. The figures are probably the last numbers investors will see before deciding whether or not to buy shares ahead of the IPO.
Ma ranks No. 35 in the world, according to the Bloomberg ranking. Alibaba has spawned other billionaires, including Joseph Tsai, the company’s vice chairman and co-founder, who controls a $4.4 billion fortune. Simon Xie, another Alibaba co-founder, owns 9.7 percent of Small & Micro and is its second biggest shareholder. His stake is valued at $2 billion.