Originally scheduled to debut in Hong Kong’s Stock Exchange and Shanghai’s STAR Market today, Ant Group’s IPO was abruptly suspended on Tuesday night by Chinese regulators in response to changes in FinTech regulations.
• Ant Group’s board of directors were called in for a closed-door meeting with Chinese regulatory authorities on Monday, which discussed the possibility of more stringent regulations, as reported by Bloomberg.
• China’s Central Bank subsequently issued new draft rules on online micro-lending, a primary function of the FinTech platform, causing the Shanghai Stock Exchange to suspend the IPO on the grounds that Ant no longer met the requisite conditions for listing.
What happened next: Alibaba’s HKSE stocks plunged by almost 6.9%, hitting a low on Wednesday. The firm owns one-third of Ant Group’s stocks and is set to announce Q2 earnings later today. However, its stocks recovered this morning, rising 5.7% by 12 pm today.
Why it matters: The suspension has shaken foreign investors’ trust in China’s burgeoning FinTech industry. Analysts have expressed concerns that this may not be a one-off event – a sentiment which could delay other FinTech IPOs and dampen investor interest in the sector.
• Shirely Ze Yu, a political economist, predicts that while capital enthusiasm will stay strong, the tightening compliance could cast further doubt over foreign investor trust on Chinese IPOs. Given that Ant’s global valuation is unprecedented, she also expects that China could potentially be in a position to influence global FinTech governance.
• Many believe that the Chinese government’s tightening of control over the booming micro-lending sector signals a marked shift towards an increasingly stricter regulatory environment that FinTech firms will have to operate in.
By the numbers:
• Ant’s dual-listing IPO was originally set to raise USD 39.67 billion for 11% of the group’s shares, which would have supplanted Saudi Aramco as the world’s largest stock listing. This would have placed Ant’s market capitalisation at USD 315 million.
• The firm will refund a total of USD 167.7 billion today and tomorrow to 1.55 million investors in Hong Kong alone, according to the SCMP. Three eminent Hong Kong brokers have agreed to waive interest payments. A total of HKD 120 billion was borrowed to subscribe to Ant’s IPO.
Looking ahead: As regulatory changes limit liquidity flow and curb operations of FinTech platforms across the country, smaller business owners and individuals may struggle to obtain financing and loans, which could slow the rate of growth among SMEs.