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Delusions of grandeur

19 Apr 2021 By Pete Sweeney

The cost of charisma has grown too steep. Chinese financial technology giant Ant is exploring ways for founder Jack Ma to exit the company, Reuters reported over the weekend, in an effort to end the pressure from Beijing and salvage what it can of a valuation that once reached $300 billion. If outspoken and larger-than-life leaders are liabilities, it pays for investors to be more discerning about who they back.

Ma’s status as the patron saint of Chinese entrepreneurship always loomed as a risk, especially as President Xi Jinping developed his own cult of personality and increased party control of private enterprise. Even though Ma largely backed out of Alibaba, he didn’t exit completely. He also retained ownership control of Ant, an asset he controversially carved out of Alibaba in 2011.

Alibaba’s online retail dominance is under pressure now, while Ant suspended its initial public offering in the face of fresh regulatory scrutiny. While official concerns about financial risk and monopolistic behaviour are warranted, it’s also clear that Ma’s mouth helped invite attention from authorities. The campaign to rein in his companies followed almost immediately after a speech in which he ripped watchdogs for suppressing innovation. Enrolments at Ma’s entrepreneurship academy, which is more of a political asset than one of monetary value, are frozen.

Key-man risk is endemic across East Asian companies, which tend to imbue founders with excess power. Many try to turn themselves into media superstars, which can be good for raising money and stock valuations but also stir political resentment. It may help explain why Pinduoduo founder Colin Huang stepped down from his board in March. Others, including Jia Yueting of Faraday Future, bask in so much hype they lose touch with business reality.

Some Ant owners – a long list that has included Carlyle, BlackRock and Credit Suisse – may prefer Ma leaves peacefully to salvage their investments. And when the next tech pitch rolls around, they may be listening for a quieter confidence. Tencent’s technocratic Pony Ma Huateng, for example, built his $780 billion messaging and gaming titan without channelling the worst tendencies of Silicon Valley founders. Chinese startups will have to brace for a Jack Ma magnetism discount.


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