Shanghai, Hong Kong suspend US$37b listing of Jack Ma's Ant Group
Ant Group's record-breaking initial public offering has been thrown into turmoil after the Shanghai Stock Exchange cited "major" changes to the Chinese fintech group's regulatory environment and suspended the listing
/NOVOSTIVL/ Ant Group’s US$37 billion (S$50.3 billion) listing has been suspended in both Shanghai and Hong Kong in a dramatic move just two days before what was set to be the world’s largest-ever stock market debut.
The Shanghai stock exchange first announced that it had suspended Ant’s initial public offering (IPO) on its Star market, prompting Ant to also freeze the Hong Kong leg of the dual listing.
Ant said that its listing had been suspended by Shanghai following a recent interview regulators held with its founder Jack Ma and top executives. It said it may not meet listing qualifications or disclosure requirements, and also cited recent changes in the fintech regulatory environment.
Shanghai described Ant’s meeting with Chinese financial regulators as a “major event”.
Ant was set to go public in Hong Kong and Shanghai on Thursday after raising about US$37 billion, including the greenshoe option of the domestic leg, in a record public sale of shares. “This is a curve ball that has been thrown at us... I don’t know what to say,” said a banker working on the IPO.
Regulators had summoned Ma, Ant’s executive chairman Eric Jing and chief executive Simon Hu to a meeting on Monday when they were told the company’s lucrative online lending business faced tighter government scrutiny, sources told Reuters. The meeting came as the Chinese authorities published new draft rules for online micro-lending.
At the end of October, Ma had called financial regulation outdated and badly suited to companies trying to use technology to drive financial innovation. But Beijing has become more uncomfortable with banks heavily using micro-lenders or third-party technology platforms like Ant for underwriting consumer loans, amid fears of rising defaults and deteriorating asset quality in a pandemic-hit economy.
Shares in Ant’s affiliate Alibaba Group fell about 8.6 per cent in pre-market trading after news of the Shanghai stock exchange suspension of Ant’s A-share IPO.
The group said on Tuesday it sincerely apologises to investors for any inconvenience caused by the suspension of IPOs in Hong Kong and Shanghai.
It added that it will wait for further notice from the regulators with respect to further developments of the offering and listing process.
Alibaba owns about a third of the payments company, which had attracted at least US$3 trillion of orders from individual investors for its dual listing in Hong Kong and Shanghai.
In the preliminary price consultation of its Shanghai IPO, institutional investors subscribed for over 76 billion shares, more than 284 times the initial offering tranche.
The fintech company’s IPO would have given it a market value of about US$315 billion based on filings, bigger than JPMorgan Chase & Co. and four times larger than Goldman Sachs Group Inc.
“This a significant blow or development for both for the company and other potential fintech issuers in Hong Kong and mainland China,” said capital markets consultant and former investment banker Philippe Espinasse.
He noted that the situation may call for a short-term clarification through an announcement or supplemental prospectus, and investors could be asked to reconfirm their orders. But not many generally would do so when something like this happens, he added.
Alibaba Group said yesterday that it will be “proactive” in supporting Ant Group to adapt to the evolving regulatory framework, adding that it “has full confidence in Ant Group colleagues’ ability to do a good job”.
Ant has been hit with a wave of fresh rules in recent months as China tightens control over online lenders and companies that operate multiple financial business lines. These have included capital and licensing requirements, a cap on loan rates and limits on Ant’s use of asset-backed securities to fund quick consumer loans.
Former senior investment banker Wang Jiyue said that the suspension “does not necessarily mean cancellation”.
“The final listing is just a matter of time. But with the online micro-lending rules freshly rolled out, Ant does have the responsibility to spell out the impact to its business,” he added.