How China's Ma Tried To Save Ant Group IPO - Report

Editorial Staff

23 December 2020

Chinese multi-billionaire Jack Ma had tried to salvage his relationships with Beijing by offering to hand over parts of his financial technology giant, which Ma founded, had been slated to have its $34 billion initial public offering more than a month ago in what would have been the world’s largest ever. However, investors were stunned when the IPO was pulled only a few days prior to the event.

Ma had in-person meetings with regulators overseeing securities, banking and insurance. That 2 November meeting took place a few days before Ant was supposed to go public, the report said. It continued that President Xi of China personally ordered Chinese regulators to investigate the risks posed by Ant, according to Chinese officials with knowledge of the matter, and to shut down the IPO.

The saga casts light on how the world’s second-biggest economy, which like others has been hit by the COVID-19 pandemic, has sought to prevent fissures opening in its financial system.

The WSJ report added that there is no decision, for now, to take Ma up on his offer. One plan being considered involves subjecting Ant to tighter capital and leverage regulations. Under that scenario, state banks or other types of state investors would buy into Ant to help cover any potential capital shortfall as a result of the tightened rules.

The saga underlines how Chinese regulators are concerned that their ability to control financial flows – and prevent future stresses – is potentially challenged by tech-driven financial services organisations such as Ant Group.

A separate report (6 December) by the WSJ said that Ant Group’s rapid lending growth rattled regulators. In just one year, Ant Group had written loans to half a billion people in China which accounted for nearly a fifth of the country’s outstanding short-term consumer debt as of June.

“People familiar with Ant’s micro-lending operations, including the company’s banking partners, competitors, investors and industry analysts, say regulators are especially concerned about the rural and city commercial banks and trust companies that have supplied a significant amount of funds to Alipay users,” the news organisation said.