Ant Group was expected to be the largest Fintech initial public offering (IPO) ever at a valuation of around $35 billion. With just days until a listing on both the Shanghai Exchange and the Hong Kong Stock Exchange, regulators in China slammed the breaks on the listing due to apparent transgressions regarding the operation of Ant Group.
Reportedly, these transgressions arose when Alibaba founder Jack Ma made critical remarks regarding Chinese officials. In a speech last month, Ma was said to have claimed that regulators only focus on risk while overlooking development. He apparently said that Chinese banks have a “pawnshop mentality” that hurts entrepreneurs.
The actual statement issued by the Shanghai Exchange that postponed the listing is available here where officials stated that Ant Group fails to “meet the issuance and listing conditions or information disclosure requirements.”
Today Dow Jones is reporting that Ma’s critical comments directed at public officials went viral compelling Chinese President Xi Jinping to halt the IPO. Officials are said to have enacted draft regulations that included compliance requirements that previously did not exist:
“Among them was one regulating online microlending. With Mr. Xi’s blessing, the central bank and the banking regulator made the draft rule even tougher than previously conceived, according to the Chinese officials familiar with the decision-making. The new rule had a requirement that didn’t exist in previous drafts: Firms such as Ant would need to fund at least 30% of each loan it makes in conjunction with banks. The draft rules were published on Nov. 2, the same day Mr. Ma and a couple of his executives at Ant were summoned to a rare joint meeting with the central bank and the regulatory agencies overseeing banking, insurance and securities.”
While the rebuke may be pubicly humiliating and profound, many observers believe that Ant Group will suck it up and comply with the freshly minted rules. But the entire saga may dim Ant Group’s valuation a bit – at least until it publicly trades.