China suspended Ant Group’s $37bn stock market listing on Tuesday, thwarting the world’s largest IPO with just days to go, in a dramatic move that left investors and bankers scrambling for answers.
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 leg of the dual listing, which was due on Thursday.
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, and also cited recent changes in the fintech regulatory environment.
The Shanghai stock exchange described Ant’s meeting with financial regulators as a “major event”.
Regulators had summoned Ma, Ant’s Executive Chairman Eric Jing and Chief Executive Simon Hu to a meeting on Monday when they were told the company’s lucrative online lending business would face tighter government scrutiny, sources told Reuters news agency.
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 move reverberated 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,” said a banker working on the IPO.
Ant was set to go public in Hong Kong and Shanghai on Thursday after raising about $37bn, including the greenshoe option of the domestic leg, in a record public sale of shares.
The IPO was a sensational draw for China’s retail investors who bid a record $3 trillion, equivalent to the entire annual economic output, for shares in the fintech giant.
Ant added that it would release further details on the suspension of its H-share listing and on application refunds as soon as possible.
Apology for inconvenience
The Chinese state-backed Economic Daily newspaper said in a commentary published after news of Ant’s IPO suspension that the listing’s delay showed regulators’ determination to protect the interests of investors and the most pressing matter was for Ant to carry out “rectifications”.
Ant’s meeting with regulators on Monday came as 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, Ma had called financial regulation outdated and badly suited to companies trying to use technology to drive financial innovation.
Ant apologised to its investors on Tuesday 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.
CICC and China Securities Co, co-sponsors for Ant’s STAR IPO did not immediately respond to requests for comment.
JPMorgan and Citigroup declined to comment, while Morgan Stanley did not immediately respond to a request for comment. The three Western banks plus CICC are co-sponsors of Ant’s Hong Kong IPO.