Alibaba Shares Tumble After Suspended Ant Group IPO

New rules by Chinese regulators would put Ant Group in the position of operating as a bank rather than a fintech, threatening its valuation.

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Now that Ant Group’s record IPO has been suspended, Alibaba shares have been tumbling. According to stock exchanges in Shanghai and Hong Kong. Jack Ma, Controller of Ant Group, Erick Jing, Ant Group’s Executive Chairman, and Simon Hu, CEO of Ant Group, found themselves summoned by Chinese regulators and were being interviewed and questioned, according to the CSRC, or China Securities Regulatory Commission.

Shanghai Stock Exchange authorities reported that Ant Group was facing “significant issues,” meaning the company might not have met disclosure requirements or the conditions needed for listing on the exchange.

The Chinese exchange decided to suspend Ant’s listing on the STAR Market, which is the Chinese version of the Nasdaq. Ant was listed on the Science and Technology Innovation Board. Ant Group also said its listing of shares would also be suspended.

The global wholesale trade platform, Alibaba, owns nearly a third of the stake in Ant Group. Last Wednesday, Alibaba’s Hong Kong shares fell by more than 7 percent during Asian trading. Its shares on the New York Stock Exchange also closed lower overnight last Wednesday by more than 8 percent. Stocks have continued to tumble over the past week and one week later is seeing more minor losses, closing on Wednesday, Nov. 11 at 265.65, or 0.33 percent lower than the previous closing day.

Ant Group had been readying itself to raise close to $34.5 billion. Had it done so, it would have made it the world’s largest IPO listing. Ant had planned to list on both the Hong Kong and Shangai exchanges on Thursday.

A spokesperson for Ant Group apologized in a statement for the IPO suspension and said the company would work to comply with the regulatory requirements of the Chinese exchanges.

The statement read, “Ant Group sincerely apologizes to you for any inconvenience caused by this development. We will properly handle the follow-up matters in accordance with applicable regulations of the two stock exchanges. We will overcome the challenges and live up to the trust on the principles of: stable innovation; embrace of regulation; service to the real economy; and win-win cooperation.”

Chinese regulators and the central bank drafted new rules for micro-lending on Monday. The new online regulations could impact Ant Group’s operations as it would require the company to hold onto more capital and change its way of doing business. The fintech’s biggest driver in terms of revenue is its CreditTech product. 

The company offers independently-written loans through partnerships with other financial institutions, including 100 or so banks. Approximately 98 percent of the Chinese giant’s credit balance originated through these financial institutions, which means that Ant Group is able to operate on less capital. 

But the proposed Beijing regulatory changes could force Ant Group to operate more like a bank rather than a fintech. Alibaba said that it would offer Ant Group support as it makes its way through the regulatory requirements.

An Alibaba spokesperson said, “We will be proactive in supporting Ant Group to adapt to embrace the evolving regulatory framework. We have full confidence in Ant Group colleagues’ ability to do a good job. Society has high expectations for Alibaba. We will continue to work hard to not only meet but exceed expectations and fulfill our responsibility to society.”

Some experts say that Ant Group’s suspended IPO could slash its valuation by more than $150 billion.

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