Updated: November 4, 2020 7:30:02 pm
Hong Kong shares swung between profit and loss after Chinese regulators scrapped Ant Group Co.’s $ 35 billion initial public offering, and when investors took in the early results of the US election. Photographer: Lam Yik / Bloomberg
Ant Group’s initial public offering (IPO) scheduled for Thursday has been delayed for now, after authorities thwarted its plans to list on the Shanghai and Hong Kong stock exchanges. The company expected to raise as much as $ 37 billion from the market, in an IPO that would have been the largest in the world, topping Saudi Aramco’s listing of $ 29.4 billion last year.
The listing was suspended after regulators met with Ant Group founder Jack Ma and other top company executives.
What is Grupo Ant?
In 2004, Ma’s Alibaba Group, which owned China’s largest online retail platform Alibaba, began building a super-fast payment platform that it said would allow its users to easily make payments.
However, the third-party digital payment application, called Alipay, exceeded all expectations and gained millions of users in a very short time. The app now has close to more than 1 billion users, reportedly with more than 730 million of them active monthly. To capitalize on Alipay’s various offerings, Ma spun off the app and incorporated it into a company called Ant Financial. Later, the company was renamed Ant Group.
Over time, Alipay, Ant Group’s number one offering, as well as being a payment facilitator for Alibaba users, also ventured into personal retail loans, wealth management, and insurance. Therefore, the Ant Group, although it was founded by Ma, is different from the Alibaba Group.📣 Click to follow Express Explained on Telegram
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Why did regulators in Shanghai and Hong Kong suspend the IPO?
In China, lending is a very tightly regulated state issue, and the government and regulators are very uncomfortable with the idea of third-party tech-driven apps like Alipay venturing into the consumer loan business.
In October this year, Ma criticized China’s “outdated” state machinery financial regulations that were stifling innovation in the sector. The comments are said to have angered top leaders of the communist regime, who have raised concerns about how banks have linked up with microlenders like Alipay.
The IPO was first suspended by the Shanghai stock exchange, called the STAR market, prompting the group to suspend the Hong Kong leg of listing. The suspension, seen as a measure to control Ma, came after a meeting between regulators and Ant Group’s top executives.
Later, the company said the listing was suspended because there had been a “significant change” in regulations related to online lending. Meanwhile, China also published new rules for online lenders and microloans from apps like Alipay.
What about Ant Group’s IPO plans now?
For now, Ant Group will have to change its working practices to satisfy the authorities if it wants to launch a new IPO. One of the changes, according to the reports, will have to be that the company is more transparent in its disclosure and other requirements such as controlling the amount of microcredits it makes each month.
Ant Group is also likely to reportedly remain firm in its plans to launch an initial public offering and will seek guidance from the former Alibaba Group on how to negotiate and navigate the difficult regulatory environment for institutional lending in the Chinese market.
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