Shocker Ant Groups Monster IPO Suspended by Regulator

It was supposed to be the largest IPO ever, with estimates saying it would raise as much as $37 billion at a valuation of more than $250 billion. However, mere days before going public, the Ant Group IPO was suspended by Chinese regulators. Initially planned for Thursday, November 11th, the IPO has now been postponed indefinitely.

Suspending the IPO

On Tuesday, November 3rd, 2020, the news broke out that regulators in China were suspending the IPO, following an inquiry of founder Jack Ma the day before. While somewhat obscure, the reason cited by regulators was “major issues” that had to do with “the financial technology regulatory environment.” Following the announcement, Alibaba, which owns the majority share in Ant Group, tanked on both the Nasdaq and Hong Kong stock exchanges.

The announcement came as a shock to many investors, who were expecting to invest in Ant, in what was expected to be the largest IPO ever, surpassing that of Saudi Aramco earlier this year. Ant Group was expected to list on two exchanges, Shanghai and Hong Kong, but announced that it was pulling its IPO from both.

A director of a Shanghai-based brokerage firm told FT: “It’s in no one’s interest to cancel the [completed share] allocations at this stage. I don’t think there’s any precedent for this type of situation.”

What is Ant?

Ant Group is the world’s most valuable Fintech company. It has been valuated at between $150-250 billion, which also makes it the world’s fourth-largest financial company. It is an affiliate of China’s tech giant Alibaba, which owns around 33% of Ant.

Among the different financial services it offers, Ant Group operates Alipay, which is used by a whopping 711 million users in China alone, conducting transactions totalling $17 trillion a year1. That represents around half of the population of the world’s most populated country.

However, the company has other revenue streams, including a service for small loans. While some of the capital is provided by Ant Group itself, the majority of the loans are provided by Chinese banks, mediated by Ant’s Huabei and Jiebei services. According to Goldman Sachs, Ant Group’s lending business could reach as high as 2 trillion Yuan by next year2.

Ant and Alibaba

Ant was founded in 2004 by Jack Ma as Alipay, the Alibaba created method of payment, enabling quick and easy payments via mobile on the Alibaba eCommerce platform. This payment method has become extremely popular, expanding to other eCommerce platforms and peer-to-peer payment uses.

In 2014, the company was rebranded as Ant Financial and Alipay remained a subsidiary payment service. The company was later renamed Ant Group, a name which it carries until today. While operating separately from Alibaba, the company is still mostly owned by the Chinese tech giant.

The company has branched out to other financial services, including the small loans business mentioned above. While Alipay remains its main revenue source, it is Ant’s focus on other services that positions it as a Fintech leader.

The Future of Ant Group

The suspension came as a tremendous blow to Ant, which was no doubt planning to use the tens of billions it would have raised in its offering to support and expand its activities. Moreover, there is no clear indication of when the IPO will take place, if at all. At the moment, there does not seem to be a threat to Ant Group’s current business, and it may continue to operate as a privately held company. However, many investors around the world, including eToro users, will now have to wait and see if they will be able to take part in Ant’s success.

Sources:

  1. https://www.bloomberg.com/news/articles/2020-08-30/as-ipo-looms-all-you-need-to-know-about-jack-ma-s-ant-group
  2. https://www.bloomberg.com/news/articles/2020-06-28/jack-ma-s-new-chieftain-lays-out-his-plan-to-fend-off-tencent

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