Sink or float: What’s next for Ant Group after China suspends world’s biggest IPO?
The tech world was thrown into turmoil yesterday after Chinese authorities put an abrupt halt to Ant Group’s record-breaking initial public offering.
The Chinese fintech giant was set to raise $34.4bn (£26.5bn) through a dual listing in Shanghai and Hong Kong in what would be the world’s largest stock market debut.
But the Shanghai leg of the listing has now been suspended after regulators said there were “major issues” with Ant’s application.
Regulators clamp down
At the heart of the suspension is greater scrutiny from Chinese authorities over the way Ant Group presents itself as a tech giant rather than a financial institution.
Ant has racked up more than 1bn users on its Alipay service, China’s biggest online payments platform, establishing its dominance as a financial services company.
But the Shanghai exchange said “significant changes” in the regulatory environment meant the company fell short of listing requirements on information disclosure.
Jack Ma, the billionaire founder of Alibaba, which backs Ant, was summoned to a meeting on Monday to outline tighter government scrutiny for online micro-lending companies.
Analysts said Ant will likely need to conform with these new rules — which are aimed at limiting how much online finance firms can lend — and disclose their financial impact on the company.
“It seems like a fair critique as the banking sector is an integrated part of the government’s policies through the credit impulse, so Chinese government cannot have a privately-owned company running a larger and larger part of the money market and payment system in China,” said Peter Garnry, head of equity strategy at Saxo Bank.
Ants in their pants
The shock halt to the IPO has already rattled markets, with shares in owner Alibaba dropping more than 7.5 per cent.
Ant today said it would repay the application money related to the Hong Kong listing, alongside brokerage commission and transaction fees, further casting doubts over the float.
Zhang Yi, chief executive of consultancy iiMedia, told Reuters Ant’s best bet may be to divide its listing into different IPOs.
This could include a listing for its credit unit and one for its tech unit, which covers online payments.
In addition, analysts said Ant would need to apply for new licences for its credit business to comply with regulators and be regulated as an entity under financial holding company rules brought in on 1 November.
Pressing ahead
Despite the challenges, analysts remained optimistic that Ant Group will comply with the new rules and press on with its mammoth IPO — even if this process takes some time.
“This IPO has all the prestige as it is the world’s biggest ever and thus Ant Group will most likely comply with the Chinese government and thus, although the timeline is uncertain, we do believe the Ant Group IPO will move forward,” said Saxo Bank’s Garnry.
That said, some analysts warned the regulatory complications could take the shine off Ant’s public listing and dent its ultimate valuation.
Li Chengdong, a Beijing-based tech analyst, told Reuters the float may raise less than originally hoped, but added that state backing and founder Ma’s influence would count in its favour.
“To stress systematic safety, this is the regulators stressing their stance,” he said. “Ant may end up having an IPO that was not as ideal as what it would have had this time, but it won’t be too bad.”