For the past few weeks, stock markets around the world waited anxiously as Chinese billionaire Jack Ma’s Ant Group Co prepared for the world’s largest initial public offering (IPO) of $ 35 billion. It would have been the world’s largest stock market debut for any company with billions at stake.
However, in an 11-hour move, China suspended the listing of the fintech firm and summoned Jack Ma. The move was a major blow to Ant Group, which was expected to make its debut on the stock exchanges on Thursday. It’s also a huge blow to Chinese billionaire and Alibaba co-founder Jack Ma, who lost nearly $ 3 billion in net worth after the IPO suspension.
The Shanghai Stock Exchange announced yesterday that it had suspended the company’s initial public offering on its technology-focused Star Market, after which Ant Group was forced to freeze its debut on the Hong Kong stock market. After the IPO, the Hong Kong Exchange shares fell sharply.
The move came as a shock to many investors who were eagerly awaiting the historic IPO. Jack Ma was then summoned by financial regulators and central bank authorities in China, who reported that there has been a significant change in the regulatory environment and that Ant’s online lending business would face tighter scrutiny.
In a statement, the Shanghai exchange called Ant’s meeting with Chinese financial regulators an “important event”, adding that the tighter regulatory environment meant that the fintech firm no longer met the requirements for an IPO.
Shortly after the shock move, Alibaba Group Holding Limited, which owns about a third of a stake in Ant Group, fell dramatically in US pre-market trading. Hong Kong’s Hang Sang Index futures also lost more than 1 percent, Bloomberg reported.
Big hit for Ant Group and Jack Ma
The suspension of the IPO is a major setback for Jack Ma’s fintech firm, which will now face tighter scrutiny and will be subject to capital and leverage restrictions like banks.
Global analysts say the move will have serious implications as the IPO was suspended on an 11-hour move. Yu Tianjiao, a Hong Kong-based Sanford C. Bernstein analyst, told Bloomberg that people who had previously given Ant Group high ratings as a technology entity will now have to question its growth potential as a financial services company.
“In the long term, investors are going to reassess the price of Ant, people who gave it high ratings as a technology company will have to start thinking of it more as a financial services company and question the growth potential,” he said.
It should be noted that Jack Ma had previously made clear that he wanted the Ant Group to be treated as a technology company rather than a finance company, which faces increased regulation in China.
Speaking to Reuters, Francis Lun, CEO of GEO Securities, said: “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 anything. “
“This has gone from the deal of the century to the shock of the century.”
Jack Ma’s Ant Group made the decision earlier to enter the Star market, a market that launched in Shanghai last year. The decision to suspend the initial public offering comes as a major blow to Ant, as the listing plan had attracted at least $ 3 trillion in orders from individual investors for its dual listing in Shanghai and Hong Kong.
If the IPO had materialized, it would have pushed Ant’s market valuation to $ 315 billion in paper, much larger than JP Morgan Chase & Co and Goldman Sachs Group. The IPO would have been higher than the Saudi Aramco deal in 2019 and Alibaba’s own listing in 2014.
The move has even puzzled many market experts who wonder what went wrong at the last minute.
What went wrong?
But the shock suspension of Ant Group’s IPO could be related to recent remarks by Jack Ma. Two weeks ago, at the Shanghai Conference, the Chinese billionaire criticized the Basel Committee of Global Banking Regulators, likening it to “a club of the elderly ”.
Ma also said that “systemic risk” is not a problem in China. He also criticized China for lacking a strong financial ecosystem. He even compared Chinese banks to “pawn shops.” However, his criticism of the Chinese financial regulatory system may have cost him.
On Monday, China’s top financial regulators summoned Ma and told him that his Ant Group’s online lending business will face increased scrutiny.
While Ma’s comments about Chinese banks may not have been wrong according to experts, the frankness with which Ma made the comments may not have gone well with Chinese financial regulators.
Jack Ma’s Group of Ants will now have to start all over again. A Reuters report, citing a person with knowledge of the matter, said Ant is now trying to establish whether he needs to disclose more information to the Shanghai exchange about his relationship with regulators or whether the exchange wants him to solve all his problems with him. regulators, which may take longer.
(With input from Bloomberg and Reuters)
