- Ant Group’s US$37 billion listing has been suspended in both Shanghai and the Hong Kong Special Administrative Region (HKSAR) two days before what was set to be the world’s largest-ever stock market debut.
- The Shanghai stock exchange first announced that it had suspended Ant’s initial public offering on its STAR market, prompting Ant to also freeze the HKSAR leg of the dual listing.
- Ant said that its listing had been suspended by Shanghai following a recent interview regulators held with its founder Jack Ma and top executives.
China suspended Ant Group’s $37 billion stock market listing on Tuesday, thwarting the world’s largest IPO with just days to go in a dramatic blow to the financial technology company founded by billionaire Jack Ma, reports Reuters.
A major event with financial regulators
The Shanghai stock exchange first announced that it had suspended Ant’s initial public offering on its STAR market, prompting Ant to also freeze the Hong Kong leg of the dual listing, which was due on Thursday.
Ant said that its listing had been suspended by the Shanghai stock exchange following a meeting that its billionaire founder Jack Ma and top executives held with Chinese financial regulators.
The Chinese financial technology giant said it may not meet listing qualifications or disclosure requirements, and also cited recent changes in the fintech regulatory environment. The Shanghai bourse described Ant’s meeting with financial regulators as a “major event.”
Regulators had summoned Ma, Ant’s executive chairman Eric Jing and chief executive Simon Hu to a meeting on Monday when they were told the company’s lucrative online lending business would face tighter government scrutiny, sources told Reuters.
Alipay platform
The firm’s Alipay platform has helped revolutionize commerce and personal finance in China, with consumers using the smartphone app to pay for everything from meals to groceries and travel tickets.
But Ant Group, which has more than 700 million monthly active users, has also caused concern in China’s state-controlled finance sector by venturing into personal and consumer lending, wealth management and insurance.
Beijing has become more uncomfortable with banks heavily using micro-lenders or third-party technology platforms like Ant for underwriting consumer loans, amid fears of rising defaults and deteriorating asset quality in a pandemic-hit economy.
“The Communist Party has shown the tycoons who’s boss. Jack Ma might be the richest man in the world but that doesn’t mean a thing. This has gone from the deal of the century to the shock of the century,” said Francis Lun, CEO of GEO Securities.
Ma has also faced state media criticism for comments in late October in which he boasted of the size of the IPO and appeared to criticise regulators for stifling fintech innovation.
Fintech risks
The move reverberated across markets, with Alibaba Group Holding, which owns about a third of Ant, falling 9% in US trading, losing nearly US$76 billion, more than double the amount Ant was going to raise in its listing.
“This is a curve ball that has been thrown at us .. I don’t know what to say,” said a banker working on the IPO.
- Ant was set to go public in Hong Kong and Shanghai on Thursday after raising about US$37 billion, including the greenshoe option of the domestic leg, in a record public sale of shares.
- The IPO was a sensational draw for China’s retail investors who bid a record US$3 trillion, equivalent to the entire annual economic output, for shares in the fintech giant.
- The share sale was also set to beat the US$29 billion chalked up by previous record-holder Saudi Aramco last December.
Beijing has called on national flagships of the tech sector to list on domestic stock exchanges rather than fundraise in the US, in a period of sharp economic and political rivalry.
Ant added that it would release further details on the suspension of its H-share listing and on application refunds as soon as possible.
Maintain control
Ant’s meeting with regulators on Monday came as Chinese authorities published new draft rules for online micro-lending.
“Ant may be just falling victim to their own size and success,” said Alex Sirakov, senior associate at advisory firm Kapronasia. “I am more inclined to think of this as a political message reminding everyone this is a highly regulated economy.”
China’s regulators are “attempting to maintain control over a fintech sector that is already huge, profitable, and rapidly evolving,” Brock Silvers, chief investment officer at Kaiyuan Capital, told AFP. “With no established rule book, regulators may have been understandably anxious to get involved.”
An earlier Ant Group statement on the meeting with regulators said “views regarding the health and stability of the financial sector were exchanged,” but otherwise gave few details.
A Sunday commentary in the state-controlled Financial News warned of internet giants like Ant Group getting too big, saying any resulting systemic problems “will lead to serious risk contagion.”
Other commentaries have urged tighter regulation of Ant Group’s online lending. The state-owned Economic Daily newspaper responded on Tuesday to the suspension calling it a demonstration of regulators’ determination to “safeguard the interests of investors.”
Apology for inconvenience
Ant apologised to its investors on Tuesday in a separate statement for “any inconvenience caused by this development,” adding: “We will properly handle the follow-up matters in accordance with applicable regulations of the two stock exchanges.”
Alibaba said that it would support Ant to adapt and embrace the evolving regulatory framework. CICC and China Securities Co, co-sponsors for Ant’s STAR IPO did not immediately respond to requests for comment.
JPMorgan and Citigroup declined to comment, while Morgan Stanley did not immediately respond to a request for comment. The three Western banks plus CICC are co-sponsors of Ant’s Hong Kong IPO.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source: Reuters
