KONTAN.CO.ID – BEIJING. Chinese President Xi Jinping personally decided to suspend Ant Group’s US $ 37 billion initial public offering on Thursday (12/11/2020). Report Wall Street Journal (WSJ) citing Chinese officials who knew of the problem.
Launch Reuters, The decision to halt what will become the world’s largest IPO comes days after billionaire fintech giant founder Jack Ma launched a public offensive against state banks and financial watchdogs.
President Xi ordered Chinese regulators to investigate and effectively shut down the flotation of the Ant stock market, reports said WSJ.
Ant Group did not immediately respond to a Reuters request for comment. The State Council Information Office, China’s cabinet, could not be reached for a statement.
Also Read: It turned out that this was China’s reason for making Ant Group’s jumbo IPO hampered
Ma had said at a summit in Shanghai on October 24 that China’s regulatory system stifles innovation and must be reformed to promote growth. Earlier this month, Reuters reported that the speech triggered a series of events that undermined Ant’s share listing plan.
Immediately after delivering Ma’s scathing speech, state regulators began compiling reports including how Ant had used digital financial products such as Huabei, a virtual credit card service, to encourage the poor and young people to accumulate debt.
Also Read: The IPO of Ant Group was canceled, retail investors have admitted to giving up
The general office of the State Council compiled a report on public sentiment about Ma’s speech and submitted it to senior leaders including President Xi, reported Reuters.
Cut valuation
Previously it was reported that the Chinese Government’s move to stop the debut of Ant Group Co’s initial share registration has the potential to reduce the fintech giant’s valuation by half. Ant’s stock valuation before the initial public offering (IPO) was US $ 280 billion. This means that Ant’s market value has the potential to drop to US $ 140 billion.
The decline in valuation also means the potential for lower commissions for investment banks such as China International Capital Corp, which relies on windfalls from Ant’s jumbo IPO plan. The failure of this IPO will also reduce the power of the company owned by billionaire Jack Ma to make acquisitions.
Quoting BloombergMonday (9/11), in a drastic step, the Chinese government decided to stop the sale of Ant shares worth US $ 35 billion last week, or just days before the fintech giant will go public in Shanghai and Hong Kong.
Also Read: Regulator: Postponement of Ant Group IPO benefits long-term capital market
So far Ant representatives declined to comment. But before that Ma was summoned by Chinese regulators for a “surveillance interview”. It was days before the Chinese Government discovered a series of shortcomings that may require an overhaul within Ant.
According to Morningstar Inc, under the proposed new Chinese regulation, it could force Ant to increase its capital in order to obtain a license to lend funds to the public and obtain a license to operate across the country.
Ant will need additional capital to meet stricter regulatory demands. Online lending companies such as Ant may be asked to provide at least 30% of the resources that will be allocated for the loan.
Meanwhile, Ant’s funds are currently only about 2% of the total loan disbursement in Ant’s balance sheet. So far, most of the funds that Ant uses to channel loans to the public come from funding from bank partners.
According to Morningstar, if the rule is passed, to secure nearly CNY 1.8 trillion of outstanding loans, Ant will need to guarantee its own CNY 540 billion of credit.
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Editor: Barratut Taqiyyah Rafie
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