What Is Next for Ant Group After Its IPO Was Suspended?By Andrea Villar | Wed, 11/04/2020 - 08:00
The long-cherished dream of setting a new record as the world's largest IPO will have to wait. After the Shanghai Stock Exchange announced this week that Ant Group's stock market debut scheduled for Thursday was suspended, investors, the company and the industry are wondering what comes next.
On Monday, Chinese regulators met with Jack Ma, founder of Alibaba, and other executives, to bring to their attention significant changes to the regulatory environment that could mean that the company will not comply with some listing requirements, the Shanghai Stock Exchange said in a statement. According to Reuters, leading regulators said Ant Group's lucrative online lending business faces tighter government scrutiny.
“(Ant Group) has been trying to present itself as a technology company, rather than a financial giant, but Chinese regulators have become increasingly uncomfortable with parts of its sprawling empire, namely its most lucrative credit business,” wrote Yingzhi Yang and Pei Li for Reuters this week.
In the first half of 2020, Ant Group contributed close to 40 percent of Alibaba Group’s revenue. Jack Ma criticized China's financial regulation in late October, calling it old-fashioned and preventing companies from innovating in the financial sector, reported said at the Bund Summit in Shanghai. Among the new rules that online micro-lending companies such as Ant's two subsidiaries, Huabei and Jiebei, will have to comply with is the ability to offer at least 30 percent of loans online in conjunction with banks, which is considered a key rule that will undermine the profitability of Ant's current business model.
The rules published by the People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) aim to “regulate the online microfinance operations of microlenders, prevent risks from online microloans, protect the legal rights and interests of microlenders and clients and promote the healthy development of the online microfinance business,” the draft points out.
According to analysts quoted by Reuters, Ant Group will have to comply with these new rules and then report how they will impact the business financially to proceed with its plans to list on the Shanghai and Hong Kong stock exchanges.
So, what options does Ant have to continue with its long-awaited US$35 billion IPO? Zhang Yi, Chief Executive of consultancy iiMedia, thinks the company’s best shot might be to split up its businesses into several IPOs, which include a credit unit IPO and a tech unit IPO, he told the WSJ. However, this means that the big listing will not be in the short term.