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Ant Group’s $ 37 billion public offering in Shanghai and Hong Kong has been suspended by Chinese regulators, a day after officials summoned Jack Ma and other Ant executives for an interview.
China’s largest fintech company was set to list in both cities Thursday in an unprecedented IPO.
The Shanghai Stock Exchange said in a statement that Ma, the founder of Ant, had been called in for “supervisory interviews” and said there had been “other major issues”, including changes in “the financial technology regulatory environment.”
“This major event may cause your business to fail to comply with issuance and listing conditions or disclosure requirements,” the exchange said. “Our exchange has decided to postpone listing your company.” He told Ant and his insurers to make an announcement about the suspension.
Ant said in a statement to the Hong Kong Stock Exchange that its overseas stock offering had also been suspended because the company “may not meet listing qualifications or disclosure requirements due to material matters related to the interview. regulatory authority from our ultimate controller, our CEO and our CEO by the relevant regulators and recent changes in the fintech regulatory environment. “
“More details related to the suspension of the [Hong Kong] The listing and the refund of the application money will be made as soon as possible ”, he added.
Shares of Chinese e-commerce group Alibaba, which owns a 33% stake in Ant, fell more than 8% in pre-market trading in New York.
On Monday, Ma, along with Eric Jing and Simon Hu, Ant CEO and Chairman, were summoned by the People’s Bank of China, as well as China’s banking, securities and currency regulators. Later, Ant said he would “implement the views of the meeting in depth.”
The meeting came after Ma criticized China’s state banks at a financial summit in Shanghai in late October. Ma suggested that the big banks had a “pawnshop mentality” and that Ant was playing an important role in providing credit to innovative companies and individuals but with little collateral.
At the same summit, however, Wang Qishan, China’s vice president, emphasized the importance of financial stability. “There must be a good balance between fostering financial innovation, strengthening the market, opening up the financial sector, and building regulatory capacity,” he said. “Safety always comes first.”
Before announcing the timing of the IPO, Ant executives met with PBoC officials this summer to seek their blessing, according to two senior group executives. Despite receiving collaterals, there have long been skeptical voices about Ant within the PBoC and China’s banking and insurance regulator, which sees itself as the champion of the country’s largest lenders.
“I’ve never seen an IPO suspended at this stage,” said a director at a Shanghai-based brokerage, who described the decision to suspend Ant’s double listing as a “last minute thing.
“Nobody is interested in canceling assignments at this stage,” added the director, “but I don’t think there is any precedent for this kind of situation.”
In his prospectus, Ant said he faced regulatory risks in China and would have to set up a central bank-approved holding company in accordance with the State Council regulations issued in September. The draft regulations suggest that Ant will have to limit loans to Rmb300,000 ($ 44,843) or one-third of a borrower’s annual payment, whichever is less.
Oliver Rui, a finance professor at China Europe International Business School, noted that Ant could previously leverage Rmb3bn in equity into Rmb300bn in loans. But under the new guidelines, Ant will have to keep at least 30 percent of his equity on his balance sheet. “Your future benefit will not be as good as it is now,” said Professor Rui.
