Shares of Chinese internet company Alibaba traded in Hong Kong plunged after regulators suspended Ant Group’s $ 37 billion listing at the 11th hour, jeopardizing the launch of the stock. the world’s largest.
Ant Group, China’s largest financial technology company, set to list in Shanghai and Hong Kong together on Thursday as part of a record public initial public offering, collected attracted USD 2.8 billion of orders from institutional and retail investors.
But on Tuesday night, the Shanghai Stock Exchange suspended its listing after Jack Ma, billionaire founders of Alibaba and Ant, was summoned by Chinese regulators to “monitor interviews”;. It also cites “other major issues” including changes to the “financial management environment”.
Ant Group later announced it would suspend its listing in Hong Kong and on Wednesday said it would refund money offered by retail investors in Hong Kong to participate in the offering.
Alibaba’s Hong Kong-listed shares fell 9.3% on Wednesday.
That leaves the stock underperforming in a day since Alibaba, which relied on Ant’s payments infrastructure for its e-commerce operations, listed in Hong Kong for about a year. before. Alibaba’s New York-traded shares closed 8.3% lower on Tuesday.
Analysts say it is difficult to determine how long Ant’s IPO will be halted.
Andrew Batson, China research director at Gavekal, a research firm, said: “Ant’s Shanghai and Hong Kong IPOs will almost certainly return to the market at some point, Although the timetable is not clear. “But a company may have to make significant changes to its internal business and organizational model to comply with the new regulatory requirements.”
Ant’s move to suspend IPO comes a week after Ma criticized China’s state-owned banks at a financial summit in Shanghai. Ma said the country’s major lenders have a “pawn shop mentality” and that Ant is playing a key role in extending credit to companies and individuals with poor collateral.
The postponement of the IPO has also raised suspicions about a day of payoffs for Wall Street investment banks and others working on the deal, expected to reap at least $ 300 million in fees.
“The deal will have to be completed in order to be paid,” said a Hong Kong-based investment banker who works on the Ant deal. “It is making people very nervous,” added an IPO lawyer in the city.
Chinese state media has posted comments supporting the suspension of IPO, saying that it is necessary to protect investors and ensure the stability of the country’s financial system.
The state-backed China Securities Journal on Wednesday published an interview with a legal scholar who said the decision was “justified and legal”.
Zhang Zixue, a professor at the Chinese University of Political Science and Law, said in the article that regulators are still determining how best to manage the country’s vast online lending industry.
In a separate comment released by Xinhua on Monday, Guo Wuping, head of the consumer protection bureau at China’s central bank, criticized “fintech companies. [for] abuse their hegemonic position ”. “Instead of taking their data from everyone to benefit everyone, [they use] it to increase some of the company’s benefits. ”
Ant’s control over the vast amount of data in China has warned regulators, which often struggle for the group to share their user information.
“No one says Ant’s business is fraudulent or illegal,” said Fraser Howie, an independent consultant and expert on China’s financial systems.
“The problem is that the legal environment in which they built their business – on which they presented a range of finances to investors – will change and change with them,” he added.
Additional reporting by Yuan Yang in Beijing and Primrose Riordan in Hong Kong