China’s state broadcaster has implicated Jack Ma’s Ant Group in a corruption scandal, Financial Times reports. Ant Group is an affiliate of Alibaba Group Holding Ltd (NYSE: BABA).
- In August, China arrested Zhou Jiangyong, former Hangzhou party secretary, for alleged corruption, helping companies acquire cheap land and enjoy preferential policies after buying shares in firms controlled by Jiangyong’s younger brother, Zhou Jianyong.
- A unit of Ant Group allegedly bought two plots of land at a discount in Hangzhou in 2019 after taking stakes in two mobile payment businesses owned by the younger Zhou, the report adds.
- The Ant unit was the only external corporate investor in one of these businesses and was among three corporate investors in the second.
- Private companies allegedly made “unreasonably high payments” to the younger Zhou for government policy incentives and support with buying real estate.
- The younger Zhou, a former business school professor, launched Youcheng United (Ningbo) Information Technology Development Co in 2016, winning contracts to build subway mobile payment systems in the coastal hubs of Ningbo and Wenzhou. At the time, his brother was the party secretary of these cities.
- Ant forged multiple deals with the younger Zhou, the report adds, citing public records and sources. Ant subsidiary Shanghai Yunxin Venture Capital Management Co paid $0.3 million for a 14.3% stake and a board seat in Youcheng United (Ningbo) in March 2019.
- Later in the year, Shanghai Yunxin spent $0.2 million acquiring a 13.5% stake in an Hangzhou-based subway payment provider owned by the junior Zhou.
- Less than a year after Ant completed the second investment, the fintech group won an auction for a plot in Hangzhou for $819 per square meter as the only qualified bidder. Interestingly, the average home prices in the neighborhood exceed $7,100 per square meter.
- Price Action: BABA shares traded lower by 0.40% at $130.50 in the premarket session on the last check Friday.
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