HONG KONG: China’s shock suspension of Ant Group’s record US$35bil listing in a last-minute regulatory ambush looks set to hit the financial technology giant’s growth prospects and cut into its valuation.
The move to suspend Ant’s IPO was seen as a stunning rebuke for billionaire Jack Ma, a former English teacher who built Alibaba Group Holding Ltd and affiliate Ant into two of China’s biggest success stories.
Ant’s enormous heft and Ma’s recent criticism of global financial regulations, however, put him on a collision course with China’s top regulators. That said, analysts and investors expect the dual Hong Kong and Shanghai listing to be delayed and not completely derailed.
“Ant’s business is likely to be restricted by new financial regulations. As a result, the relaunched IPO price will most likely be lowered, ” said Andrew Collier, managing director of Orient Capital Research.
The Tuesday decision by the Shanghai stock exchange to suspend the listing followed a meeting between China’s financial regulators and Ant executives, including Ma, who were told the company’s lucrative online lending business would face tighter scrutiny, sources told Reuters.
The exact nature of the regulators’ concerns and just how long a suspension might last is not known. The Shanghai bourse described the meeting as a material event that could cause Ant to be disqualified from listing.
Ant said in a filing yesterday it would maintain close communication with regulatory authorities and the Hong Kong and Shanghai bourses on the progress of its IPO and listing and would disclose information in a timely manner.
The move by regulators has been interpreted as an effort to cut Ma down to size after he made a speech at an event last month attended by Chinese regulators that criticised the financial and regulatory system as stifling innovation.
Regulators have, however, also become uncomfortable with banks increasingly using micro-lenders or third-party technology platforms such as Ant for underwriting loans amid fears of rising defaults and a deterioration in asset quality in a pandemic-hit economy.
State media yesterday also described the move as necessary and in the public interest. “The basic message of Chinese regulators’ intervention in the Ant IPO is that this de-risking agenda is still the top priority. No innovation is so important that it can be allowed to create financial instability, ” said Andrew Batson at Gavekal Research. He added that Ant would “almost certainly” return to the market at some point, but it might have to make substantial changes. — Reuters
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