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Explainer | Why the record-breaking Ant Financial IPO was cancelled two days before launch

Spun-off from Jack Ma’s Alibaba Group, Ant Financial’s IPO has been the poster child of China’s post-coronavirus economic recovery. Retail investors alone splurged almost $3 trillion in "frenzied bids" for shares.

November 04, 2020 / 04:47 PM IST

The suspension of Ant Financial’s stock market debut on November 3 came as a shock to investors who were greatly anticipating what was dubbed as "the world’s biggest initial public offering" at $34.5 billion (Rs 2.58 lakh crore).

Retail investors in Shanghai had placed bids for nearly $3 trillion worth of shares. The impending listing was first suspended on the Shanghai Stock Exchange (SSE), and the Stock Exchange of Hong Kong (SEHK) followed suit.

Spun-off from Jack Ma's Alibaba Group, Ant Financial’s IPO has been the poster child of China’s post-coronavirus economic recovery.

Who said what

The management of SSE said the plug was pulled due to regulatory changes in the financial technology (fintech) space and "possible failure to meet disclosure requirements" by Ant. They gave no other details. Meanwhile, the SEHK did not give out any reason for its postponement.

Close

In a joint statement, the People's Bank of China (PBoC), China Securities Regulatory Commission (CSRC), China Banking and Insurance Regulatory Commission (CBIRC) and the State Administration of Foreign Exchange (SAFE) put out a joint statement on the issue saying "regulatory interviews" were held with Ant Group Founder Ma, Chairman Eric Jing and President Hu Xiaoming on November 2.

Read: Ant Group IPO: Check out the scale of the biggest public offering in the world

Ant Group in a statement confirmed that its executives met with government agencies and said the discussion centred on the "health and stability of the financial sector". The company affirmed a commitment to implementing the opinions discussed, but did not reveal any further details.

"We will continue to improve our capabilities to provide inclusive services and promote economic development to improve the lives of ordinary citizens," it added.

Was the move sudden?

There were hints of trouble after Ma, Jing and Xiaoming were summoned for the meeting on November 2 as Ant has come under "increased scrutiny and tighter regulation" after increasing the scope of its fintech services.

However, the suspension did come a mere 48 hours ahead of the scheduled dual debut.

As per The Global Times, Ant has been asked to clarify its business model, financial innovations and data privacy measures, among other issues. The state-run English daily further said that government agencies ask could include a "possible restructure of its business."

The Chinese government's concerns regarding the company also stem from the fact that it has invested 2.63 trillion Yuan worth of state pensions into Ant since 2015 through strategic investment from the National Social Security Fund.

Besides the company in particular, the Chinese central bank on November 2 raised the registered capital requirement for all lenders such as Ant to a minimum of 5 billion Yuan ($747 million, Rs 5,581 crore).

Other regulations and restrictions include limits on use of asset-backed securities to fund consumer loans, new capital and licensing requirements, and limits on lending rates.

Why was this IPO a big deal?

Ant Group was set for a first-time ever dual debut on the SSE and SEHK on November 5. With a planned $39.67 billion stock sale allotment, it broke the record for the largest fundraising bid.

There was high anticipation for the IPO, with retail investors alone splurging $3 trillion in "frenzied bids" for shares, as per the South China Morning Post.

Of this, 19.05 trillion Yuan ($2.85 trillion) worth of bids were received on Shanghai's Star Market – an oversubscription by 870 times. On the SEHK, 1.55 million retail investors parted with $167.7 billion or Hong Kong Dollar 1.3 trillion for shares – overbidding by 398 times, the SCMP report added. The company has initiated a bid to return the money to its Hong Kong investors in two tranches.

(With inputs from PTI and AP)
Jocelyn Fernandes
first published: Nov 4, 2020 04:47 pm

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