Ant Group's $ 37 billion itemizing was suspended when China hit the brakes

© Reuters. FILE PHOTO: An Ant Group logo is depicted at the company's headquarters in Hangzhou, China

By Julie Zhu and Meg Shen

HONG KONG (Reuters) – China on Tuesday suspended the $ 37 billion Ant Group listing, foiling the world's largest IPO in just a few days. This led investors and bankers to search for answers.

The Shanghai Stock Exchange first announced that it had suspended Ant's initial public offering on its STAR market, prompting Ant to freeze the portion of the Hong Kong double listing due Thursday as well.

Ant said its listing on the Shanghai Stock Exchange was suspended following a meeting held by its billionaire founder Jack Ma and top executives with Chinese financial regulators.

The Chinese financial tech giant said it may not meet listing qualifications or disclosure requirements and also cited recent changes in the regulatory environment for fintech.

The Shanghai Stock Exchange called Ant's meeting with financial regulators a "major event".

Regulators had invited Ma, Ant's CEO Eric Jing, and CEO Simon Hu to a meeting on Monday when they were told that the company's lucrative online lending business would be under tighter government scrutiny, sources told Reuters.

In Beijing, banks have found it more uncomfortable to often use micro-lenders or third-party technology platforms like Ant to write consumer loans, as fears are raised in a pandemic-hit economy that defaults will increase and asset quality will deteriorate.

"The Communist Party showed the tycoons who the boss is. Jack Ma may be the richest man in the world, but that doesn't mean anything. This has gone from deal of the century to shock of the century," said Francis Lun, CEO of GEO Securities.

The step echoed across markets Alibaba (NYSE 🙂 Group Holding, which owns about a third of Ant, fell 9% in US trade and lost nearly $ 76 billion, more than double the amount Ant would put up on its listing.

"This is a curve ball that was thrown at us. I don't know what to say," said a banker who worked on the IPO.

Ant was scheduled to go public in Hong Kong and Shanghai on Thursday after raising around $ 37 billion in a public record sale of shares, including the domestic branch's greenshoe option.

The IPO was a sensational draw for China's retail investors, who bid a record $ 3 trillion, equivalent to total annual economic output, for shares in the fintech giant.

Ant added that it will release more details on the suspension of its H-share listing and refunds of applications as soon as possible.

Graphic: Alibaba shares are crashing – https://fingfx.thomsonreuters.com/gfx/mkt/oakvenwkepr/alibaba.PNG

Apologies for any inconveniences

The state-backed Chinese business newspaper Economic Daily said in a comment released after news of Ant's IPO suspension that the listing delay demonstrated the regulators' determination to protect the interests of investors and the most pressing matter was that Ant made "corrections".

Ant's meeting with regulators on Monday came as Chinese authorities released new draft rules on online microcredit.

"Ant may only be a victim of her own size and success," said Alex Sirakov, senior associate at consulting firm Kapronasia. "I'm more inclined to see this as a political message reminding everyone that this is a highly regulated economy."

At the end of October, Ma had said that financial regulation was out of date and ill-suited for companies trying to use technology to drive financial innovation.

Ant apologized to investors in a separate statement on Tuesday for "any inconvenience caused by this development" and added: "We will properly handle the follow-up in accordance with the applicable regulations of the two exchanges."

Alibaba said it would help Ant adapt to and embrace the evolving legal framework.

CICC and China Securities Co, co-sponsors of Ant's STAR initial public offering, did not immediately respond to requests for comment.

JPMorgan (NYSE 🙂 and Citigroup (NYSE 🙂 declined to comment while Morgan Stanley (NYSE 🙂 did not immediately respond to a request for comment. The three western banks plus CICC are co-sponsors of Ant's Hong Kong IPO.

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