It’s an exciting week for investors. And a jittery one too what with the U.S. Presidential elections taking place amidst a seemingly uncontrollable pandemic.
In China, things are looking up. The pandemic is now under control, as Jack Ma’s Ant Group readies itself for its Initial Public Offering (IPO) in Shanghai and Hong Kong.
The IPO, scheduled to take place on November 5, 2020, was dubbed the world’s biggest because of its US$35 billion worth of shares.
But Ant Group’s IPO is not happening.
China has thrown a spanner into the mix, halting the listing after Ma was brought in for “supervisory interviews” by Chinese agencies. This is according to a statement from the Shanghai stock exchange.
The statement read that there was “significant change” in the regulatory environment which could cause Ma’s company to not comply with the requirements on listing and information disclosure.
A statement from Ant Group added that the Hong Kong listing would be suspended too.
A shocking move.
Chinese regulators have been warning Ma that his Ant Group, a fintech company, will face increased scrutiny and will experience similar restrictions on capital and leverage as banks.
The billionaire founder of e-commerce platform Alibaba himself was summoned to China’s central bank and three other top financial regulators for a rare joint meeting.
Following the meeting, Ant agreed that it will follow guidelines and “implement the meeting opinions in depth”. Among the guidelines Ant agreed to follow include supervision, service to the real economy, and stable innovation.
Starting off in Hangzhou in 2010 as a subsidiary of Alibaba, Ant Group now dominates China through its Alipay app. It also is one of the two largest consumer lending platforms and runs Yu’ebao money market fund and provides credit scoring and a marketplace for insurance.
In short, Ant Group is a threat.
Prior to the IPO, Ma had made some scathing remarks at a fintech conference in October.
In his pitch, he had dubbed traditional banks as “pawn shops” and said that future lending decisions should be based on data.
This could have caused Chinese officials to get jittery which then led regulators to suspend the IPO.
It’s also important to note that Ant collects huge amount of data from its customers, something which Chinese authorities don’t have access to.
While China supports its homegrown companies, it also expects a certain degree of control over them.
Ant Group, however, is getting out of control in the eyes of China. So the suspension comes as a signal, a sign, that ultimately Chinese authorities are the real bosses.
Why is the IPO important for Alibaba Group Holding Ltd and investors?
Alibaba, being one of the companies Ma founded, owns 33 percent of Ant Group.
In U.S., the news of the halting of Ant’s IPO led Alibaba’s stocks to fall by 9.6 percent while its futures on Hong Kong’s Hang Seng index dropped by 1.2 percent.
When the news of the IPO broke, it attracted some US$3 trillion of orders from individual investors. Over 76 billion shares, 284 times the initial offering trance, were subscribed by institutional investors alone.
Many of these investors have already locked in billions and seeing the IPO halted on the eve of its listing truly sucks.
Had the IPO gone through, Ant Group would have been given a market value of around US$315 billion, making it larger than U.S.’ JPMorgan Chase & Co and a whopping four times bigger than Goldman Sachs Group Inc.
Cover image sourced from Gill™ Mask.
ที่มา : Mashable