Shanghai exchange cites ‘major issues’ when suspending debut
Ma was called into a meeting with top regulators on Monday
Jack Ma's Wealth Plunges by Nearly $3 Billion After Ant IPO Suspension
It was heralded as China’s answer to JPMorgan -- a homegrown financial giant on the cusp of the biggest stock-market debut the world has ever seen.
Instead, with billions on the line and an initial public offering all but sealed, Chinese authorities have abruptly thrown into doubt the future of Ant Group Co. and its celebrated founder, the billionaire Jack Ma.
Only days before the financial-technology juggernaut was to go public in Shanghai and Hong Kong -- a coup for China’s financial markets that once would have been unimaginable -- the $35 billion IPO was halted on Tuesday after Ma was summoned by regulators. In an extraordinary turn of events, authorities announced that they had belatedly discovered an array of shortcomings that, by some accounts, might require the sprawling Ant to be overhauled.
“The way I’d read it, it’s a deliberate public relations move,” said Sean Darby, chief global equity strategist at Jefferies. “This has happened before when companies appear to have become too big versus the state for the authorities’ liking.”
Reaction in the financial market was swift. Ma’s Alibaba Group Holding Ltd., which owns a third of Ant, plunged 7.1% in Hong Kong, after falling by the most in almost six years in New York. The sell-off reduced Ma’s fortune by almost $3 billion. Hong Kong Exchanges & Clearing Ltd., owner of the city’s bourse, dropped 2.2%.
Jack Ma Photographer: Jean Chung/Bloomberg
The move upends what had been one of China’s biggest business success stories, as well as what was to be a pivotal step in the development of the nation’s fast-growing capital markets.
“It’s definitely surprising,” said Mike Bailey, director of research at FBB Capital Partners. “If there is something strange going on on the macro side for China’s financial markets or in the company, that would be worrisome.”
In just a decade, Ant, an affiliate of Ma’s Alibaba Group, has exploded into the world’s largest financial technology company, reshaping the lives of many ordinary Chinese. But its ascendance -- and Ma’s growing global reputation -- has also posed a threat to China’s state-run lenders and their political benefactors.
Tuesday’s developments left bankers and global investors groping for answers. The immediate fate of the many billions already tied up in the IPO is for now uncertain.
Chinese authorities didn’t give much detail about the issues behind the suspension, beyond saying that the much-anticipated debut couldn’t go ahead because there had been “significant change” in the regulatory environment.
The company will have to make changes that include capital increases at its lucrative micro-lending units, according to people familiar with the matter. It will also have to reapply for licenses for the units to operate nationwide, the people added, asking not to be identified discussing a private matter.
The IPO is expected to be delayed by about six months, and funds will be returned to investors in the meantime, news portal QQ.com reported, citing an unidentified person.
Major gray market brokers for the deal, including BTIG LLC, told clients all transactions will be canceled, according to people familiar with the matter. Millions of shares were traded in the over-the-counter market prior to Ant’s planned debut, many at about a 50% premium to the listing price of HK$80 ($10.32). BTIG didn’t immediately respond to a request for comment.