Stunning Halt on Ant IPO Thanks to Beijing

By Thomas Price Thursday, November 5, 2020

Jack Ma is one of the richest men in the world, yet the power he holds is not close to that of the Chinese government. This was recently reinforced as the highly-touted Ant Group initial public offering (IPO) has been halted by the Chinese government. This will be an extremely costly decision for Jack Ma and Ant Group as a whole; however, there may be some reasons behind this. While the reasons may not necessarily be legitimate, the Chinese government has clearly made a point to flex their own power in this decision, which has some significant consequences. So, what exactly was Ant Group looking forward to in their IPO, and why has the Chinese government come forward and halted it?

Ant Group’s IPO

Ant Group was set to see record-breaking numbers in the coming days. As the company responsible for creating the largest online payment platform in China in conjunction of course with Alibaba, also controlled by Jack Ma, many investors saw incredible value in Ant Group. As a result, Ant Group was listed on both the Hong Kong Stock Exchange and Shanghai’s Start Market, with expectations for share sales going through the roof. Given the similar share prices for each exchange, the initial public offering would have been colossal. In fact, the IPO would reach a record-breaking height of $34.4 billion. Based on this IPO, Ant Group would then be valued at an astounding $310 billion. This is largely based on the success of their payment app, Alipay, as well as their overall technology advancements. In fact, it was recently reported by the company that they have over 731 million monthly active users. More than just these impressive figures is the $17.7 trillion worth of transactions Ant Group oversaw in the 12 months from June 2019 to June 2020. In the meantime, the company’s revenues skyrocketed as well, with the nine-month period that ended in September showing Ant Group up 43% compared to the same time period in 2019. This translates to about $17.7 billion in total revenue and a solid $10.4 billion in gross profit. All of this success was set to create a major moment for the financial and investing world that had already garnered some serious attention. However, the Chinese government had other plans as they halted the IPO, apparently until a later date.

The Chinese Government’s Decision

The official reason given by Chinese regulators as to why they suspended the upcoming IPO was due to “major issues,” which could possibly be responsible for it “not [meeting] the listing conditions or disclosure requirements.” These comments have been put into a bit of doubt, however, as these regulations come just a week after Ma made comments criticizing Chinese regulators for stifling innovation in order to minimize risk. While his comments may have been inflammatory, China’s responding actions mark the larger shift the government has been taking in the past few years. Previously, entrepreneurs like Jack Ma were valued and praised by the Chinese government for their work in stimulating the economy. In contrast, that sentiment has recently changed, with the government now making it very clear that they either want businessmen in control who are loyal to the country or want the state to run the business. In fact, in the country’s new set of guidelines, those who work in the private sector should be people who will “firmly listen to the party and follow the party.” While this was very tough news for Ant Group, it will likely not be the end of their hopes for an IPO, with most analysts expecting the company to regroup and try again in about six months.

Final Conclusions

Ant Group’s IPO was set to reach record-breaking levels of investments. Jack Ma was set to gain billions more into his own wealth. However, the Chinese government made a show of force that they are still in charge. Despite the amount of money on the table, the state remains the most powerful force in the nation. Jack Ma spoke out against regulators and was punished for it. While the company will most likely make another go of it in 2021, the Chinese government made a statement here that will surely ring in many entrepreneurs’ and investors’ ears.

About the Author

Headshot for author Thomas Price

Tom Price is a writer focusing on Entertainment and Sports Features. He has a degree from NYU in English with a minor in Creative Writing. He has been previously published for Washington Square News, Dignitas, CBR, and Numbers on the Boards.

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