In 2020, Jack Ma’s financial services company Ant Group – the fintech subsidiary of his ecommerce empire Alibaba – was preparing a blockbuster $37 billion dual-listed IPO in Shanghai and Hong Kong.
Investors worldwide were eagerly anticipating the listing as the company’s valuation kept on reaching new highs. Indeed, a week before the IPO date, Ant Group was valued as high as $315 billion.
However, things didn’t exactly go as planned.
A few days before the listing, Chinese regulators shocked the world when they announced the listing was cancelled. They expressed deep concerns over the company’s potential overreach and the lack of regulatory control over their financial products and services.
In truth, the regulators’ concerns had some merit.
Alibaba, Ant Group’s majority owner, serves more than 1 billion users and 80 million merchants through its digital payment platform Alipay. In addition, as of March 2019, Ant’s flagship money market fund had nearly 590 investors, which is nearly one-third of the Chinese population.
This made Ant’s money market fund the largest in the world by far, and reports suggest that Chinese President Xi Jinping himself intervened to stop the IPO. Some experts recommend Xi was concerned that Ant would gain too much power over the country’s financial system.
At first, the company’s directors tried to reassure investors.
Fred Hu, the Ant Group director, claimed that the regulatory oversight wasn’t a major concern and that the firm would proceed with the listing “before too long”. The expectation was that Ant Group would provide regulators with evidence it was compliant, would not breach existing privacy laws, and would not threaten the harmony of China’s financial system.
While Hu declared that Ant Group had sufficient capital to support itself and was also ready to proceed with the dual listing, he also added that there was “no rush” or specific timetable for rescheduling Ant’s IPO.
As a result of the growing uncertainty, Fidelity Investments, one of Ant Group’s early investors, slashed the company’s valuation to $300 billion.
Unfortunately for investors, the worst was yet to come.
A few months later, the Chinese regulators’ audit concluded that Ant Group was guilty of overreach. Officials then deal the death blow and forced Ant to restructure into a financial holding company.
If that wasn’t enough, Alibaba was fined a record $2.75 billion antitrust fine and Jack Ma, the company’s charismatic founder, was forced to take a step back and distance himself from the company he created.
The combined regulatory crackdown and record fine cast a dark cloud over Ant Group’s potential to become the financial services behemoth it was once destined to be. Indeed, the regulators’ actions seemed to limit Ant’s prospects by lowering its ability to generate revenues and profits.
Today, analysts are wondering whether Ant Group will ever go public.
The most optimistic analysts believe the IPO could take place as early as 2023. Others take a more cautious approach and claim that no blockbuster IPOs will take place until Chinese regulators ease the ongoing repression of the nation’s tech sector.
At present, other tech giants such as ByteDance, TikTok’s parent company, and Xiaohongshu, one of the most popular e-commerce apps, are also facing increased scrutiny. In sum, the prospects of Chinese tech giants going public in the near future, IPOs look bleak.
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