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SHANGHAI: China suspended Ant Group’s stock listing worth $ 37 billion on Tuesday (Nov. 3), thwarting the world’s largest IPO with just a few days to go, in a dramatic move that left investors and bankers struggling to find answers.
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 double listing, which expires on Thursday.
Ant said its listing had been suspended by the Shanghai Stock Exchange following a meeting its billionaire founder Jack Ma and top executives held with Chinese financial regulators.
The Chinese fintech giant said it may not meet listing ratings or disclosure requirements, also citing recent changes in fintech’s regulatory environment.
The Shanghai Stock Exchange described Ant’s meeting with financial regulators as a “major event.”
Regulators had summoned Ma, Ant CEO Eric Jing and CEO Simon Hu to a meeting Monday when they were told the company’s lucrative online loan business would face stricter government scrutiny. sources told Reuters.
The company’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 to travel tickets.
But Ant Group, which has more than 700 million monthly active users, has also caused concern in China’s state-controlled financial sector by venturing into personal and consumer loans, wealth management and insurance.
Beijing has become more uncomfortable with banks largely using microlenders or third-party technology platforms like Ant to underwrite consumer loans, amid fears of rising defaults and deteriorating asset quality in a economy hit by a pandemic.
“The Communist Party has shown the tycoons who’s boss. Jack Ma might be the richest man in the world, but that means nothing. This has gone from the deal of the century to the hit of the century,” Francis Lun said. , CEO of GEO Securities.
Ma also faced criticism from state media for comments in late October in which he bragged about the size of the IPO and appeared to criticize regulators for stifling fintech innovation.
READ: Fin or technology? China’s Ant, the Largest IPO in History, Says It’s a Tech Company, Not a Bank
FINTECH RISKS
The move hit all markets, with Alibaba Group Holding, which owns about a third of Ant, dropping 9% in US trade, losing nearly $ 76 billion, more than double the amount Ant it was going to collect on your listing.
“This is a curve ball that has been thrown at us … I don’t know what to say,” said a banker who works at the IPO.
Ant was to go public in Hong Kong and Shanghai on Thursday after raising about $ 37 billion, including the domestic tranche greenhoe option, in a record public sale of shares.
The IPO was a sensational draw for Chinese retail investors who bid a record US $ 3 trillion, equivalent to the entire annual economic output, for shares of the fintech giant.
The stock sale was also set to surpass the $ 29 billion recorded by the previous record holder Saudi Aramco last December.
Beijing has asked national flagships of the tech sector to list on national stock exchanges instead of raising funds in the United States, in a period of acute economic and political rivalry.
Ant added that it would release more details on the suspension of its H-share listing and application redemptions as soon as possible.
READ: Here’s why China’s Ant Group is about to break IPO records
KEEP CONTROL
Ant’s meeting with regulators on Monday came as Chinese authorities published a new draft of rules for online microloans.
“Ant may be falling victim to his own size and success,” said Alex Sirakov, a senior associate at the consulting firm Kapronasia. “I am more inclined to think of this as a political message that reminds everyone that this is a highly regulated economy.”
China’s regulators are “trying to maintain control over an already huge, profitable and rapidly evolving fintech sector,” Brock Silvers, chief investment officer at Kaiyuan Capital, told AFP.
“Without an established rule book, regulators may have been understandably eager to get involved.”
An earlier Ant Group statement on the meeting with regulators said “views were exchanged on the health and stability of the financial sector,” but otherwise gave few details.
A comment Sunday in the state-controlled Financial News warned that internet giants like Ant Group are getting too big, saying any resulting systemic problems “will lead to serious risk contagion.”
Other comments have called for stricter regulation of Ant Group’s online loans.
The state newspaper Economic Daily responded to the suspension on Tuesday, calling it a demonstration of regulators’ determination to “safeguard the interests of investors.”
READ: Trump Administration To Consider Adding China’s Ant Group To Trade Blacklist: Report
DISCUSSION FOR INCONVENIENCE
Ant apologized to its investors Tuesday in a separate statement for “any inconvenience caused by this development,” adding: “We will properly handle follow-up matters in accordance with the applicable regulations of the two exchanges.”
Alibaba said it would help Ant adapt and embrace the evolving regulatory framework.
CICC and China Securities Co, co-sponsors of 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.
