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Home / Business / Why China stopped Ant’s IPO, causing Jack Ma to suffer

Why China stopped Ant’s IPO, causing Jack Ma to suffer

This is arguably the week that one of China’s biggest tech companies hosted the most lucrative upcoming party in history, sending an astonishing message about the country’s economic might in time. pandemic period.

Instead, China has sent another message: No private business can swagger unless the government comes in.

The regulators withdrew on Tuesday on an initial public offering of Ant Group, the internet financial giant, which was ready to press the “Go” button when launching a 34 billion share. USD in Shanghai and Hong Kong.

The IPO will bring in more cash than Saudi Aramco, the state oil giant, when it went public last year. And Ant must have raised money on the opposite side of the planet from New York, which has long been a favorite listing destination for Chinese tech corporations.

But by firing a last-minute torpedo at Ant and Jack Ma, the company’s controlling shareholder and famous founder of e-commerce giant Alibaba, the authorities have made it clear that right International bragging is more important than making sure private companies know where they stand next to the state.

Ant lies at the intersection of two industries – finance and technology – that are facing scrutiny everywhere. American officials are circling the giants of Silicon Valley, plotting to calculate the power they wield over commerce and society.

In China, however, the authorities under Xi Jinping, the country’s top leader, have given a tough, uncompromising advantage in their tactics to enforce the Party’s will. Communism.

Global corporations have been disqualified. A tycoon has been detained. In September, Ren Zhiqiang, a wealthy real estate developer with political connections, was sentenced to 18 years in prison after he criticized Xi for the government’s handling of the coronavirus.

After Xi declared war on food waste this year, the official news media and video platforms turned their backs on live streamers who recorded them eating away from distractions. slag – a niche genre of internet popularity, but a worthy reward for the stars.

Kellee S. Tsai, dean of the School of Social Sciences and Humanities at the Hong Kong University of Science and Technology, said: “What happened to Ant reinforces a sense that showing respect for State-party agency is really necessary. “The capitalists have to play by the political rules of the game.”

For many businesses in China, this has been a year worth thanks – all things considered – for the government. Economic growth is being constrained. Authorities control most of the virus.

Ant applied to the stock exchange in August, nearly a decade after the company was separated from Alibaba. Ant’s Alipay app is used by more than 730 million people every month. It has become a major portal for personal credit, loan, investment and insurance in addition to a payment instrument. But getting to this point has been a long journey for Ant, who has a lot of dust with regulators.

Many controls have been taken. China’s insurance and banking regulator discussed new rules for online lenders in September. Stricter scrutiny of financial holdings is expected. Effective November 1.

Late last month, when Ant’s massive IPO was about to end, Mr. Ma appeared at a financial conference, The Bund Summit. He spoke after the adults including Wang Qishan, the vice president of China and Yi Gang, the central bank governor.

“Our next speaker needs a little introduction,” said the host. “He said he went to the Bund Summit today to bomb.”

One camera caught Mr. Ma getting up from his seat and shrugging, as if off guard.

“I didn’t throw any bombs,” he said as he got onto the podium. “Who dares to throw bombs?”

Then he proceeded to throw many bombs. He appealed to financial regulators for being obsessed with risk mitigation, even though he said, “there’s no innovation in the world without risk.” He accused China’s banks of behaving like a “pawnshop” when only lending to people with collateral.

The audience applauded politely as he left the stage. But the state news agencies criticized his remarks in later days.

After Ant placed the listing price on its stock, investors stamped it to place an order. In Shanghai alone, more than five million people applied. The total number of shares they want to buy is 870 times the amount offered.

But on Monday night, the financial regulators announced that they had summoned Mr. Ma and other company executives for a meeting. In a shocking announcement the next night, the Shanghai Stock Exchange called the IPO time

An article on social media called Ma’s statements in Shanghai “the most expensive speech in history”.

That is not a speech he is supposed to give. Mr. Ma retired from Alibaba last year and has no formal role in Ant’s management. His net worth is estimated to be more than $ 50 billion.

In recent months, his public work has involved fighting pandemic, improving rural education and empowering entrepreneurs in Africa. At the Shanghai summit, he was introduced as the chairman of the United Nations High Commission on Digital Cooperation and an advocate of the United Nations Sustainable Development Goals.

By choosing financial regulation, Mr. Ma hit on a sensitive topic. In recent years, China has increased its online lending operations rapidly. According to regulators, the country had 5,000 such lenders not long ago. By the end of September, there were only six.

This week, state media claimed that Ant’s decision to suspend IPO was a prudent one to be taken to protect investors.

Andrew Collier, founder and chief executive officer of Orient Capital Research, said he believes the protection of large government-run banks in China is a factor in the move. Banks pay Ant fees to help them extend credit to customers they may not serve, but at a cost to their own profits.

“My personal opinion is that banks are looking for excuses to solve this problem in the first place and also give them the right time to try to speed up their own online operations,” he said.

Twenty years ago, when China needed more global capital and also much less confidence in its scope of the world, “the board” would be very reluctant to do this, “Collier added. because it will make them look indecisive. “

Today, Chinese leaders are less concerned with how they act abroad than on the implementation of domestic priorities. The severance of relations with the United States on trade, technology and other fronts has prompted the Communist Party to reaffirm Xi’s broad mission to steer China through chaos.

“They are trying to find a balance between opening up and maintaining control in this brand new environment,” said Minxin Pei, a government professor at Claremont McKenna College. “Coming out of Covid, although China has done well, there are still many unknowns ahead.”

“Romance is one of the uncertainties, be careful,” said Pei. “When you have Ant, which is really huge, that will allow people to move money a lot more easily, is actually very little transparent – that might worry them.”

On Friday, Ant is in the process of refunding investors who paid for a portion of the blocked IPO.

Sha Sha, 33, an insurance broker in Hong Kong, borrowed more than $ 20,000 to take the action. She registered to buy 2,500 Hong Kong shares for about $ 10.30 each, but was allocated only 50 shares.

She was delighted to be included on such a list of historical significance. She is more cautious now.

“It looks like there are bigger uncertainties,” said Ms. Sha. “In half a year, if there is a new listing, I will be more careful and think more.”

Cao Li contributed reports.

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