China delivers clear warning by halting Ant’s historic IPO
Last week was supposed to be when one of China’s biggest tech companies threw the most lucrative coming-out party in history, sending a swaggering message about the country’s economic might during the pandemic.
Instead, China sent a different message: No private business gets to swagger unless the government is on board with it.
Regulators pulled the plug Nov. 3 on the initial public offering of Ant Group, the internet finance giant, which had been all but ready to press go on its $34 billion stock debut in Shanghai andHongKong.
The IPO would have brought in more cash than did Saudi Aramco, the state-run oil giant, when it went public last year. And Ant would have raised the money on the opposite side of the planet from New York, which has long been the favored listing destination for Chinese tech groups.
But by firing a last-minute torpedo at Ant and Jack Ma — the company’s controlling shareholder and celebrity founder of e-commerce titan Alibaba — authorities made clear that international bragging rights mattered less than ensuring private companies know where they stand next to the state.
Authorities under Xi Jinping, the country’s top leader, have brought a steely, uncompromising edge to their tactics for enforcing the Communist Party’s will.
Globe-straddling conglomerates have been leashed. A tycoon was disappeared into custody. In September, Ren Zhiqiang, a wealthy, politically connected property developer, was sentenced to 18 years in prison after he criticized Xi for the government’s
handling of the coronavirus.
Ant filed to go public in August, nearly a decade after the company was spun out of Alibaba. Ant’s Alipay app is used by more than 730 million people everymonth. Ithas become a major portal for personal credit, loans, investments and insurance in addition to a payment tool. But getting to this point was a long journey for Ant, one with numerous dust-ups with regulators.
More controls were already on the way. China’s banking and insurance regulator discussed new rules for online lenders in September. Tighter supervision of financial holding companies was scheduled to go into effect Nov. 1.
Late last month, as Ant’s mega IPO was coming together, Ma made an appearance at a financial conference, the Bund Summit in Shanghai. He spoke after bigwigs including Wang Qishan, China’s vice president, and Yi Gang, the central bank governor.
He roasted financial regulators for being obsessed with minimizing risk, even though, he said, “there is no innovation in this world without risk.” He accused China’s banks of behaving like “pawnshops” by lending only to
those who could put up collateral.
The audience applauded politely as he left the stage. But state-run news outlets criticized his remarks in the days that followed.
After Ant set the listing price for its stock, investors stampeded to place orders. More than 5 million people applied in Shanghai alone. The total number of shares theywanted to buy was 870 times the number being offered.
But on the evening of Nov. 2, financial regulators announced that they had summoned Ma and other company executives for a meeting. In a shock announcement the following night, the Shanghai Stock Exchange called time on the IPO.
Andrew Collier, founder and managing director of Orient Capital Research, said he believed protecting China’s big governmentrun banks was a factor in the move. Banks pay Ant fees to help them extend credit to customers they might not otherwise serve, but at a cost to their own profitability.
“My personal view is that the banks were looking for an excuse to nip this in the bud and also give them adequate time to try to get their own online operations up to speed,” he said.