China suspends world’s biggest IPO in shock move, blow to Jack Ma’s Ant Group
Chinese regulators have suspended the historic Ant Group IPO in a major blow to billionaire Jack Ma. The 11th-hour move has led to sharp losses in global stock markets and has depleted Ma’s net worth by almost $3 billion.
Chinese billionaire Jack Ma has suffered a huge blow after the historic Ant Group IPO was suspended in a shock move. (Photo: Reuters)
Over the past few weeks, stock markets around the world were waiting anxiously as Chinese billionaire Jack Ma’s Ant Group Co was getting ready for the world’s biggest initial public offering (IPO) at $35 billion. It would have been the world’s largest stock market debut for any company with billions on the line.
However, in an 11th-hour move, China suspended the fintech firm’s listing and summoned Jack Ma. The move came as a big blow to Ant Group, which was expected to make its debut in the stock markets on Thursday. It is also a huge blow to Chinese billionaire and Alibaba co-founder Jack Ma, who lost nearly $3 billion in net worth after the IPO suspension.
The Shanghai stock exchange announced yesterday that it had suspended the company’s initial public offering on its tech-focused Star Market, following which Ant Group was forced to freeze its Hong Kong leg stock market debut. After the IPO was pulled down, Hong Kong Exchange shares fell sharply.
The move came as a shock for many investors who were eagerly waiting for the historic IPO. Jack Ma was then summoned by financial regulators and central bank authorities in China, who informed that there has been significant change in the regulatory environment and that Ant’s online lending business would face tighter scrutiny.
In a statement, the Shanghai bourse termed Ant’s meeting with Chinese financial regulators as a “major event” and added that the tougher regulatory environment meant the fintech firm no longer complied with requirements for an IPO.
Soon after the shock move, Alibaba Group Holding Limited, which owns about a third of a stake in Ant Group, fell sharply in premarket US trade. Futures on Hong Kong’s Hang Sang index also lost over 1 per cent, reported Bloomberg.
Big blow to Ant Group and Jack Ma
The suspension of the IPO is a major setback for Jack Ma’s fintech firm, which will now face tighter scrutiny and will be subjected to restrictions on capital and leverage as banks.
Global analysts say that the move will have serious implications as the IPO was suspended in an 11th hour move. Yu Tianjiao, a Hong Kong-based analyst from Sanford C. Bernstein told Bloomberg that people who had earlier given lofty valuations to Ant Group as a tech entity will now need to question its growth potential as a financial services firm.
“Longer term, investors are going to reevaluate Ant’s price, people who gave it lofty valuations as a tech company will have to start thinking about it more like a financial services firm and question the growth potential,” he said.
It may be noted that Jack Ma had earlier made it clear that he wanted Ant Group to be treated as a technology company rather than a financial company, which faces higher regulation in China.
Speaking to Reuters, Francis Lun, CEO of GEO Securities, said, “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.”
A decision was taken earlier by Jack Ma’s Ant Group to enter the Star market — a market that was launched in Shanghai last year. The move to suspend the IPO comes as a major blow to Ant as the listing plan had attracted at least $3 trillion of orders from individual investors for its dual listing in Shanghai and Hong Kong.
If the IPO would have materialised, it would have propelled Ant’s market valuation to $315 billion on paper, much bigger than JP Morgan Chase & Co and Goldman Sachs Group. The IPO would have been greater than Saudi Aramco’s deal in 2019 and Alibaba’s own listing in 2014.
The move has even puzzled many market experts who are wondering what went wrong at the last minute.
What went wrong?
But the shock suspension of Ant Group’s IPO could be related to recent statements given by Jack Ma. Two weeks ago at the Shanghai Conference, the Chinese billionaire criticised Basel Committee of global banking regulators and compared it to “an old man’s club”.
Ma also said “systemic risk” is not an issue in China. He also criticised China for lacking a solid financial ecosystem. He even likened Chinese banks with “pawn shops”. However, his criticism of Chinese financial regulatory system may have cost him.
On Monday, China’s top financial regulators summoned Ma and told him that his Ant Group’s online lending business will face further scrutiny.
While Ma’s comments about Chinese banks may not have been wrong according to experts, the straightforwardness with which Ma made the comments may not have gone down well with Chinese financial regulators.
Jack Ma’s Ant Group will now have to start from scratch again. A Reuters report, quoting a person with knowledge about the matter, said that Ant is now trying to establish if it needs to disclose more information to the Shanghai exchange about its relationship with regulators or if the bourse wants it to resolve all its issues with the regulators, which may take more time.
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