According to NPR, Ant Group, a massive Chinese financial technology company, was suddenly halted from listing on the Shanghai Stock Exchange just days before its IPO date. NPR reports: “What was supposed to be the world’s largest initial public stock offering has been halted at the last minute. The Chinese financial company, Ant Group, was set to go public on Thursday. The IPO was expected to raise an estimated $37bn and boost Ant’s market value to in excess of $300bn.”
The Chinese authorities used vague language in their reasoning to justify stopping the IPO. The official statement from the Chinese regulators (translated using Google Translate) goes as follows: “Recently, it happened that your company’s actual controller, chairman and general manager were jointly conducted supervision interviews by relevant departments, and your company also reported major issues such as changes in the financial technology regulatory environment. This major event may cause your company to fail to meet the issuance and listing conditions or information disclosure requirements.”
The incredibly vague language cites “major issues” and “failure to meet information disclosure requirements”. Majority owner Jack Ma and Ant chairman Eric Jing were both summoned to talk with regulators.
Alibaba shares dropped 8.1%, their biggest decline since 2015, sending financial shockwaves throughout the market. Alibaba owns 33% of Ant Group with Alibaba co-founder, Jack Ma, owning another 50%.
The Financial Times reports: “One broker in Hong Kong said the suspension would cause ‘quite profound’ damage for retail investors. ‘I’ve never seen an IPO suspended at this stage,’ said a director at one Shanghai-based brokerage, who suggested it was a ‘very last-minute thing’. ‘It’s in no one’s interest to cancel the [completed share] allocations at this stage,’ the director said. ‘I don’t think there’s any precedent for this type of situation.’
Although the cancellation of the IPO is certainly a negative development, the move was very likely a political move rather than a legal one. The problem is that Jack Ma, China’s equivalent of Jeff Bezos, has made plenty of comments disparaging China’s public financial systems, making the case for an innovative company like Ant Group.
NPR reports that Ma remarked: “China does not have a systemic financial risk problem. Chinese finance basically does not carry risk; rather, the risk comes from lacking a system,” he told those gathered for a finance conference in Shanghai. “China today needs policy experts, not paper pushers.” In his comments, Ma also dismissed Chinese banks as “pawnshops” giving loans out to companies “that do not need money. As a result, many good companies have turned into bad companies.”