Alibaba subsidiary Ant Group doesn’t just have to cancel its record IPO. China’s authorities are suddenly putting new reins on the world’s largest fintech company. Did founder Jack Ma become too arbitrary?
Beijing (dpa) – After the planned record IPO of the Ant Group was canceled at short notice, the Chinese financial giant and its parent company Alibaba are under pressure.
After a decline of around eight percent on the New York stock market, the share of the largest online trading company Alibaba continued on Wednesday in Hong Kong with a minus of more than seven percent. The group owns a third of the Ant Group, whose IPO in Shanghai and Hong Kong surprisingly failed the day before.
Within just a decade, Ant Group has risen to become the largest fintech company in the world with the mobile payment service Alipay, which is popular in China. It also offers loans, insurance, and asset management online today. Alipay shares the mobile payment market in China with the competition from Wechat-Pay from the Chinese Internet company Tencent. Today, the billion-dollar population usually only pays in shops with their mobile phones by scanning a code.
Ant Group apologized to investors who had expected the biggest IPO of all time this Thursday. The Shanghai Stock Exchange had justified the cancellation the previous day with the fact that the “regulatory environment” had changed. Doing so could prevent Ant Group from meeting its IPO and disclosure requirements. “It is a decision to protect capital market stability and the rights and interests of investors,” Foreign Office spokesman Wang Wenbin defended the procedure in front of the press in Beijing.
The debut was supposed to bring in $ 34.5 billion, dwarfing Saudi Aramco’s largest IPO of $ 29 billion in December. The Ant Group would have been valued at more than 300 billion US dollars – more than the US bank JP-Morgan Chase & Co or four times more than the investment house Goldman Sachs.
However, the supervisory authorities acted abruptly and surprisingly harshly against the Ant Group, which, according to experts, could be facing a major overhaul. Sean Darby of the US investment bank Jefferies saw a targeted step: “It has happened before when companies seem to have become too big for the government for the taste of the authorities,” Darby told the Bloomberg finance agency.
The government tightened the screws over the weekend with deliberations from the Finance Committee headed by Vice Premier Liu He. New plans for restrictions on online lending were presented on Monday, which are likely to severely affect the Ant Group’s business. According to this, such companies will in future have to finance 30 percent of the loans granted jointly with banks.
At the Ant Group, however, it is only two percent, as reported by the Chinese business magazine “Caixin”. With a share of 39.4 percent in the first half of the year, the lending business was already larger than the Alipay payment service, which made up 35.9 percent of revenues.
The authorities are targeting the lending platform through which Ant Group brings loans from banks and other financial institutions to millions of consumers. Banking and insurance regulators want to dissuade lenders from using the fintech giant’s hub, Bloomberg reported. Some of them have already been asked to adhere to the drafts announced Monday for the future restrictions, the agency quoted informed people who wanted to remain anonymous.
On Monday, Alibaba founder Jack Ma and other company executives were also summoned by China’s central bank and the banking and securities regulator. Because of the extraordinary action, it has been speculated that billionaire Ma may have drawn the wrath of regulators.
A speech by China’s second richest man two weeks ago should not have gone down well, it said. The Alibaba founder, who is otherwise always loyal to the Communist Party, had sharply criticized local and global regulatory authorities. “Good innovation is not afraid of regulation, but it is afraid of outdated regulations,” the billionaire was quoted as saying. The future should not be regulated “with yesterday’s methods”.
© dpa-infocom, dpa: 201104-99-205426 / 2
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