Regulators halt Ant Group's Shanghai, Hong Kong IPO

Jack Ma, founder of Ant Group and its parent, Alibaba Group, was one of several executives called in for supervisory interviews, the Shanghai Stock Exchange said in a statement. There are references to “changes in the financial technology regulatory environment and other major issues.” In a separate statement to Hong Kong investors, Ant Group cited “material matters” relating to the interviews and the possibility that listing criteria and disclosure requirements had not been met.

Ant Group was poised to begin trading on November 5 following a record dual offering on Shanghai’s Science & Technology Innovation Board – also known as the Star Market – and Hong Kong’s main board. The company was expected to raise more than $35 billion in a heavily oversubscribed IPO – individual investors alone applied for $3 trillion worth of shares – and achieve a market capitalization of around $313 billion.

The suspension comes after Ma criticized local and global regulators for stifling innovation and not paying sufficient heed to development and opportunities for the young, Bloomberg reported. Ma and Ant Group’s senior leadership were subsequently told at their meeting with regulators that the company would have to comply with the same restrictions on capital and leverage that apply to traditional banks.

Separately, the People’s Bank of China and the China Banking & Insurance Regulatory Commission recently issued draft regulations for online lending that cap the size of loans that can be extended to individuals at RMB300,000 or one-third of the borrower’s annual salary, whichever is lower. Loans to businesses cannot exceed RMB1 million.

The draft rules also require online lenders to contribute a larger portion of loans from their own resources, impose restrictions on how loans can be used, and ban regional banks from lending outside their home provinces through micro-lending platforms. Moreover, the largest online players will be subject to central rather than local regulatory supervision.

Ant Group is best known as the parent of Alipay, the largest digital payments platform in China with 711 million monthly active users (MAUs). However, its operations are much broader. The company claims to have “established the ‘capillaries’ of the financial system to complement the ‘arteries’ operated by major financial institutions,” with interests in credit, investment services, and insurance.

The credit business comprises Huabei, an unsecured revolving credit product intended to cover daily consumer expenses, and Jiebei, which focuses on larger-ticket transactions. During the 12 months ended June, Ant Group working with approximately 100 banks – including Mybank, an online-only lender it helped set up – to facilitate RMB1.7 billion ($253 million) in consumer credit and RMB422 billion in small business credit.

Ant Group has raised more than $20 billion in external private funding. Its most recent round comprised $10.3 billion in US dollar-denominated equity funding and a further RMB21.8 billion in renminbi. Participants included GIC Private, Warburg Pincus, The Carlyle Group, and Canada Pension Plan Investment Board (CPPIB). It valued the business at $150 billion.

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• Topics
• Greater China
• Financials
• Technology
• IPO
• China
• Alibaba Group
• Ant Financial
• GIC Private
• The Carlyle Group
• Warburg Pincus Asia
• Canada Pension Plan Investment Board (CPPIB)