China has suspended Ant Group’s $37bn stock market listing, preventing the world’s largest IPO with just two days to go, in a dramatic move that left investors and bankers stunned.
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 version of the dual listing, which was due on 5th November.
Ant said that its listing had been suspended by the Shanghai stock exchange following a meeting that its billionaire founder, Jack Ma and top executives held with Chinese financial regulators.
The Chinese financial technology giant said it may not meet listing qualifications or disclosure requirements, also citing recent changes in the fintech regulatory environment.
The Shanghai stock exchange described Ant’s meeting with financial regulators as a “major event”.
According to reports, regulators had summoned Mr Ma, Ant’s Executive Chairman, Eric Jing and Chief Executive, Simon Hu to a meeting when they were told the company’s lucrative online lending business would face tighter government scrutiny.
Beijing has become more uncomfortable with banks heavily using microlenders 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.
“The Communist Party has shown the tycoons who’s boss. Jack Ma might be the richest man in the world but that doesn’t mean a thing. This has gone from the deal of the century to the shock of the century,” said Francis Lun, CEO of GEO Securities.
The shock move affected the group across markets, with Alibaba Group Holding, which owns about a third of Ant, falling 9 percent in United States trading, losing nearly $76bn, more than double the amount Ant was going to raise in its listing.
“This is a curveball that has been thrown at us … I don’t know what to say,” a banker working on the IPO told reporters.
Ant was set to go public in Hong Kong and Shanghai on 5th November after raising about $37bn, including the greenshoe option of the domestic leg, in a record public sale of shares.
Ant has said that it would release further details on the suspension of its H-share listing and on application refunds as soon as possible.
Ant’s meeting with regulators also came after Chinese authorities published new draft rules for online micro-lending.
“Ant may be just falling victim to their own size and success,” said Alex Sirakov, senior associate at advisory firm Kapronasia. “I am more inclined to think of this as a political message reminding everyone this is a highly regulated economy.”
At the end of October, Jack Ma had called financial regulation outdated and badly suited to companies trying to use technology to drive financial innovation.
Ant has apologised to its investors in a separate statement for “any inconvenience caused by this development”, adding: “We will properly handle the follow-up matters in accordance with applicable regulations of the two stock exchanges.”
Alibaba said that it would support Ant to adapt and embrace the evolving regulatory framework.
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