(Bloomberg) – China warns Jack Ma and senior executives of Ant Group Co. that the fintech giant will face new restrictions during its expansion, highlighting the growing legal risk for the world’s largest public offering just days ago when launching deals.
Ma, Ant’s billionaire co-founder and one of China’s most powerful businessmen, was summoned to a rare joint meeting on Monday with the country’s central bank and three regulators Other top finance. While neither side disclosed details of what was discussed, those familiar with the matter said Ant’s leadership team has been informed that the company will face stricter scrutiny. and is subject to the same capital and leverage constraints as banks.
Investors have long understood that Ant will abide by the new Chinese rules for financial corporations, but the meeting could nonetheless ease the frenzy surrounding stock market launches. history̵7;s greatest. Ant will begin trading on Thursday after raising at least $ 34.5 billion in an IPO attracting more than $ 3 trillion in orders from retail investors in Shanghai and Hong Kong.
Kevin Kwek, an analyst at Sanford C. Bernstein, said: “Regulatory risk is the biggest risk factor for Ant Group. “We believe the news will only gradually increase the negative for the listing and believe that most investors will remain optimistic about Ant’s long-term positive outlook. However, investors may reconsider their growth assumptions when there are clear signs of legal intervention. “
Chairman Ant Eric Jing and CEO Simon Hu joined Ma at the meeting, which included the banking watchdog, the China Securities Regulatory Commission and the State Foreign Exchange Administration, according to a statement. CSRC’s father on Weibo. The release describes it as a “yuetan” or a regulatory warning.
Ant said in a statement that it will “take the meeting’s opinions in depth” and adhere to guidelines including steady innovation, including monitoring and serving the real economy.
Central banks, banking regulators and CSRC did not respond to requests for further comment.
Ant has faced a wave of new regulations in recent months as China has tightened its controls on online lenders and companies across multiple areas of the financial business. The measures include capital and license requirements, loan ratio limits, and limits Ant’s use of asset-backed securities to finance FMC. On Monday, the banking regulator released draft rules forcing Ant and the other operators of the online lending platform to fund a larger share of the loans they offer alongside banks. row.
The Hangzhou-based company, the 2010 subsidiary of e-commerce giant Alibaba Group Holding Ltd., dominates China’s payment market through the Alipay app. It also operates the giant money market fund Yu’ebao and two of the country’s largest consumer loan platforms. Other businesses include credit scoring units and the insurance market.
Ant has faced criticism from Chinese state media in recent days after Ma criticized local and global regulators for repressing innovation and disinterest full of development and opportunities for young people. At a conference in Shanghai late last month, he compared the Basel Accords, which set capital requirements for banks, to a club for the elderly.
“Good innovation is not afraid of regulation, but obsolete,” Ma said. “We should not use train station management to regulate airports, nor should we use the way of managing the future using yesterday’s method.”
A meeting over the weekend of the Financial Development and Stability Commission, chaired by Deputy Prime Minister Liu He, emphasized the need for fintech companies to be regulated.
Opinions in official papers – including those run by the central bank and banking watchdog – blamed Ant for straying from the core payments business. and that big technology has fooled consumers beyond their capabilities.
Guo Wuping, head of consumer protection at the China Banking and Insurance Regulatory Commission, wrote in a comment Monday that Ant’s consumer loan service Huabei is similar to a card credit but have a higher fee. Fintech companies use their market power to impose exorbitant fees in partnerships with banks, which provide most of the funds needed, he said.
Ant, which has more than 700 million monthly Alipay users, has partnered with traditional banks to be central to its strategy. Its lending platforms extended credit to about 500 million people over the 12 months through June, charging an annual interest rate on smaller loans of around 15 percent.
New measures proposed by the banking regulator on Monday for online lenders include imposing limits on the amount of loans offered to individual borrowers as well as leverage.
The draft rules could deal a blow to Ant as they require platform operators to provide at least 30% of the capital for loans. About 2% of the 1.7 trillion yuan ($ 254 billion) of loans Ant facilitated as of June is now on its balance sheet, the company said in its prospectus. .
Ant declined to comment on the proposed measures.
The market impact of the new regulatory scrutiny for Ant will become more apparent when the stock launches on Thursday, but for now investors seem to be receiving the news positively. Alibaba, which owns about a third of Ant, jumped 2% in New York on Monday. Ant maintained an early gain in the so-called gray market in Hong Kong, where the stock is said to be trading at 50% higher than the Hong Kong $ 80 list price on Monday.
Francis Chan, a Hong Kong analyst for Bloomberg Intelligence, said the IPO proceeds could help Ant meet growing capital requirements.
(Update details on meeting chaired by the deputy prime minister in paragraph 12)
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