China halts $37bn Ant Group IPO, citing ‘major issues’
Shanghai and Hong Kong stock exchanges postpone listing two days before trading was due to start
Ant Group’s $37bn public offering in Shanghai and Hong Kong has been suspended by Chinese regulators, one day after officials summoned Jack Ma and other Ant executives for an interview.
China’s largest financial technology company was set to list on Thursday in both cities in a record-breaking IPO.
The Shanghai stock exchange said in a statement that Mr Ma, Ant’s founder, had been called in for “supervisory interviews” and there had been “other major issues”, including changes in “the financial technology regulatory environment”.
“This material event may cause your company to fail to meet the issuance and listing conditions or information disclosure requirements,” the exchange said. “Our exchange has decided to postpone the listing of your company.” It told Ant and its underwriters to make an announcement about the suspension.
Ant said in a statement to the Hong Kong stock exchange that its offshore share offer had also been suspended because the company “may not meet listing qualifications or disclosure requirements due to material matters relating to the regulatory interview of our ultimate controller, our executive chairman and our chief executive officer by the relevant regulators and the recent changes in the fintech regulatory environment”.
“Further details relating to the suspension of the [Hong Kong] listing and the refund of the application monies will be made as soon as possible,” it added.
One broker in Hong Kong said there would be “quite profound” damage from the suspension for retail investors. “I've never seen an IPO suspended at this stage,” said a director at one Shanghai-based brokerage, who suggested it was a “very last minute thing”.
“It's in no one's interest to cancel the [completed share] allocations at this stage,” the director added, “but I don't think there's any precedent for this type of situation.”
Shares in Chinese ecommerce group Alibaba, which owns a 33 per cent stake in Ant, were down as much as 9 per cent in early trading in New York. A spokesperson for Alibaba said it would be “proactive in supporting Ant Group to adapt to and embrace the evolving regulatory framework”.
At the end of October, Mr Ma criticised China’s state-owned banks at a financial summit in Shanghai. Mr Ma suggested the big banks had a “pawnshop mentality” and that Ant was playing an important role in extending credit to innovative but collateral-poor companies and individuals.
On Monday, Mr Ma, together with Eric Jing and Simon Hu, Ant’s chief executive and chairman, were called in by the People’s Bank of China, as well as China’s banking, securities and foreign exchange regulators. Subsequently, Ant said it would “implement the meeting opinions in depth”.
Guo Wuping, an official at the banking regulator, advocated greater regulation of Ant and other financial technology companies in a commentary on Monday, noting their consumer lending products charged higher fees than credit cards issued by banks.
Mr Guo said fintech companies often lured young people into overspending so that “some people in low income groups and young people fall deep into debt traps”.
Meanwhile, the PBoC and China’s banking regulator jointly released new draft regulations on online lending on Monday, which will oblige Ant to cap loans at either Rmb300,000 ($44,843) or one-third of a borrower’s annual pay — whichever is lower. The rules could also make issuing loans across China’s provinces harder and analysts say they may dent Ant’s bottom line.
Ant apologised to investors and said it would “keep in close communications with the Shanghai Stock Exchange and relevant regulators, and wait for their further notice with respect to further developments of our offering and listing process”.