The overhyped initial public offering (IPO) of Ant Group has been suspended because of “major issues” preventing it from meeting the listing conditions or disclosure requirements, according to an official statement issued by Shanghai Stock Exchange.
The dual listing in both Shanghai and Hong Kong Stock Exchanges was set to raise $37 billion, making it the biggest IPO in history. Its debut on the two exchanges was scheduled for Nov 5.
China’s top financial regulators, including the People’s Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange, conducted a joint regulatory talk with Alibaba’s top management on Monday. Alibaba founder Jack Ma, Ant Group’s chairman Eric Jing and the fintech company’s CEO, Simon Hu, attended the meeting. No further details have been disclosed.
Some investment bankers believe that the suspension of IPO is a political event, which came after the conclusion of the fifth plenary session of the 19th Central Committee of the Communist Party of China during which Xi Jinping further consolidated his power.
Ant Group was “suspended” the listing of its A-shares by the Chinese mainland authority, and the H-shares in Hong Kong were suspended voluntarily by the company. A member of the underwriting team involved in Ant’s H-shares stated that they had not received any information about the suspension from Ant Group or the regulatory agency beforehand, describing the incident as shocking. Regarding when Ant Group can be re-listed, many investment bankers said that it is difficult to restart the IPO in the near future.
Some investment bankers said that the term used by the Shanghai Stock Exchange is “very serious”, which can be interpreted as Ant’s business model or major changes, which may not be eligible for listing. This cannot be resolved by updating the prospectus. He pointed out that the listing of Ant Group can only be determined by the China Securities Regulatory Commission. “The Hong Kong Stock Exchange is all ordered by the China Securities Regulatory Commission. If the mainland China Ant Group does not meet the listing requirements, nothing can be done (in Hong Kong)!”
Ant Group is a loan shark disguised as a fintech company. Over 40% of its profit comes from its lending business trapping 500 million Chinese including college and high school students without credit history or the means to pay back their loans. Its high lending rate makes it a highly profitable “loan shark” and the world’s largest “underground bank”, posing threats to the traditional banking business in China like a ticking time-bomb.
98% of its 2.1 trillion renminbi (Chinese currency) loans are funded by traditional banks, so traditional banks take the risks while Ant Group takes the profits. So some describe Ant Group as a vampire sucking blood from consumers, banks, and businesses using its payment system due to high transaction fees.
Many believed that the internal power struggle within the Chinese Communist Party is the main reason for the sudden suspension of the IPO.