Jack Ma was supposed to be China̵7;s richest man this week, and his Ant Group’s stock market launch should be the biggest ever.
However, things did not quite go according to plan.
Ant was dual listed on Thursday in Hong Kong and Shanghai with a value of around $ 34.4 billion (£ 26.5 billion).
Instead, the listing was suspended after a last-minute examination by China’s financial regulators.
According to the report, Ma’s shares are worth about $ 17 billion and could bring his net worth to around $ 80 billion.
Drew Bernstein, co-management partner at Marcum Bernstein & Pinchuk, the consulting firm for Chinese companies, said: “The deal is not only completed to take off, the wheel is actually off the ground .
Some analysts see the move as an attempt by Beijing to downplay a company that has become too strong and a leader who has become too outspoken.
So how did Mr. Ma – a man from small beginnings become a symbol of China’s growing technological potential and power – become a threat?
Rags to riches
Ma outraged Chinese government officials at a financial technology conference last month in Shanghai, where he likened China’s state-dominated banking sector to “pawnshops. ”And lament their lack of innovation.
According to Duncan Clark, author of Alibaba: The house that Jack Ma built in some way, it is the classic Jack Ma.
“This is not the first time he’s been off the leash. He just doesn’t like to follow a specific story or scenario. And he loves provocation, like any great storyteller, ”he said.
And like many other great storytellers, he often relies on autobiographical detail. He told his own story as one of perseverance, but he never let go of his failures and struggles.
He grew up poor in Hangzhou, struggled to study and failed his college entrance exam twice. When trying to work, he was rejected by dozens of employers. He applied to Harvard 10 times, but never got in.
Perhaps most famously, he applied for a job at KFC, but then he found out that out of the 24 people they interviewed, he was the only one who couldn’t get a job.
He passed the university entrance exam for the third time and entered the teaching college. He continued to work as an English teacher a few years later. And during a trip to America as an interpreter, he discovered the internet for the first time.
After a failed internet business, he founded Alibaba in 1999 with a $ 60,000 loan he raised from friends.
Alibaba continued to enjoy huge success, dominating China’s e-commerce and raised $ 21.8 billion in its first share sale in 2014. He officially retired from Alibaba in 2014. last.
Today, of course, he isn’t always seen as David taking on the role of Goliath.
“He makes a living by being underestimated. It is getting more and more difficult. As you get richer and stronger, expectations go up, Clark said.
‘Scale of absolute interest’
Expectations have certainly been built up for Ant Group’s market launch.
Ant’s most famous service, Alipay, started out as Alibaba’s payment platform. It holds payments in the form of escrow until the buyer receives their item. It is central to Alibaba’s growth, as it allows shoppers to feel safer online. Now, it’s more widely used than cash or credit cards in China.
The company split in 2011 and was later renamed Ant Financial and then Ant Group. Alibaba attributed the move at the time to regulatory changes in China. Jack Ma holds a large stake in a spin-off company, expanding into other financial services such as insurance, property management and consumer lending.
Many analysts said it was not the vengeance of the officials that made Ant’s debut difficult. Ma’s comments may not be political, Clark said, but they are not the only reason regulators are concerned.
“I feel that it is the sheer size of the interest in the offering and how people raise money, usually through debt, to invest,” he said.
Reuters reported that banks are lending large sums of money to retail investors.
Ant’s consumer finance division is more of a matchmaker than banking. It makes loans to small businesses and retail customers, but passes those loans over to the banks that guarantee them.
Ant earns fees from the banks, but has no reserve hold requirement and is less risky to its own balance sheet.
Cautious Chinese regulators have for a time been concerned about the growing number of online lenders in China and how they might affect the broader financial system.
According to draft rules released by the People’s Bank of China on Monday, online lenders must provide at least 30 percent of any loan they fund in conjunction with banks.
When the IPO was suspended, the Hong Kong Stock Exchange said it was because the company “may not meet listing or disclosure requirements” and also attributed “recent changes. in the “fintech regulatory environment” could be a stumbling block.
“This is a really, really big thing. But I don’t think China won’t make any deals. Drew Bernstein says they won’t put their financial system at risk for a deal.
The way forward
It seems unimaginable that Ant will not return with a new prospectus and attempt another stock market launch.
“The company will have to restructure somewhat. May commit to add some capital to the loan department, apply for more licenses. Then they will be able to return to the market, ”said Bernstein.
Some analysts think there will be pressure to ditch consumer lending entirely.
According to some estimates, Mr. Ma personally lost billions of dollars when the stock issuance failed. But determination stands out in his story.
A man who applied to Harvard 10 times cannot seem convinced by a refusal from the regulators.