Suspension of Ant Group’s dual public offerings later this weekend – a day after Chinese regulators convened
Alibaba Group Holding
Founder and controlling shareholder Ant Jack Ma and other top executives for a meeting – could spark a reassessment of the valuation of Chinese fintech businesses, especially those in China. start-ups, but it’s unlikely to derail the recent Chinese IPO boom.
Ant’s highly anticipated concurrent public offerings on the Hong Kong and Shanghai stock exchanges are expected to raise $ 34.4 billion, making it the largest IPO in the world. The deal was significantly oversubscribed, reflected strong demand from investors, and would likely attract even more Chinese companies to launch in their home countries. Fund managers also expect the offering to draw more attention to fintech businesses within a range of other companies such as
(code: JD) and
But the postponement of the offering after Chinese regulators enacted new regulations and CEO Ant being brought in to meet with regulators was not the kind investors expected. Alibaba’s US-listed shares (BABA), which still holds a third of Ant after the offering, fell 6.7%, at $ 289.98, in recent trading as investors took hold. try to evaluate the decrease. Shares of other Chinese companies with fintech businesses fell only slightly, with JD.com down 0.5%, at $ 86.68, and Tencent Holdings shares falling 0.58% overnight. 598 USD Hong Kong.
“The new financial regulations are clearly negative in the short term for Ant, but we think things will eventually be resolved as the government wants a vibrant microfinance sector and Ant is the only way they get there, ”said Arthur Kroeber, founding partner of Chinese research firm Gavekal Dragonomics, by email.
The business nature of Ant, serving a billion users and generating more than $ 17 trillion in annual payment volume, puts it on regulators’ sights. “Ant has a very long history of running ahead of regulators and they are operating at the edge of fintech innovation, by definition potentially creating systemic risk,” Krober said. “They are also very large in scale. Very few other companies fit this particular profile. So at the first read, here is a read. Most likely it will eventually continue with a delay.
However, Ant’s valuation may need to be significantly adjusted amid the prospect of increased regulation, said Winston Ma, former chief executive and North American regional head of the Chinese national wealth fund. , China Investment Corp, and author of The Unicorn Hunt: How sovereign funds are reshaping investments in the digital economy.
And that sentiment can spread more widely. “If Ant had a hit IPO, everyone else would be lifted up,” Ma said in an interview. “For all fintech startups in China, this is the time of fact check and reassessment.”
Meetings with senior leaders reveal new rules could be more complicated. Plus, they could draw attention to a broader regulatory scrutiny around antitrust and personal data privacy issues, Ma said. As for Ant, Ma thinks it may take some time for the company to go back to a public offering, with the necessary regulations and disclosure information.
Ant’s IPO is expected to further enhance the reputation of Shanghai’s Star board, China’s answer to Nasdaq, which has already ranked as the third most popular destination for waves. IPO after the New York Stock Exchange and Nasdaq. Analysts do not think the delay could derail the listing dynamics of Chinese companies closer to their home country. Shanghai topped the destination in terms of IPO proceeds in the first quarter, while proceeds from IPOs and Hong Kong rose 67% in September compared to the same period last year.
Chinese companies are also becoming increasingly interested in the Star Boards of Hong Kong and Shanghai to list closer to home, a trend analyst like Kroeber sees is continuing despite Ant’s delays. However, the delay can create some reputational damage to the Chinese market due to a large IPO derailed at the last minute because of the combination of regulatory and political mismatch.
But the background is likely to keep the trend going. The continued push for Chinese companies to list in the US to fail to comply with audit rules has led a number of major Chinese companies, including Alibaba and JD, to secure secondary listing in Hong Kong and American fund managers swapped their shares for local listings. It’s a trend most people see that continue, despite IPO delays – and whoever wins the US election.
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