Chinese internet firm Alibaba’s Hong Kong-traded shares fell sharply after regulators halted the $37bn listing of its Ant Group spin-off at the eleventh hour, jeopardising the world’s biggest share debut.

Ant Group, China’s largest financial technology company, had been set to jointly list in Shanghai and Hong Kong on Thursday as part of a record-breaking initial public offering, which had drawn $2.8tn worth of orders from institutional and retail investors.

But on Tuesday evening, Shanghai’s stock exchange suspended the listing after Jack Ma, the billionaire founder of Alibaba and Ant, was summoned by Chinese regulators for “supervisory interviews”. It also cited “other major issues” including changes to the “financial regulatory environment”.

Ant Group then announced it would pause its Hong Kong listing and on Wednesday said it would refund money put up by retail investors in Hong Kong to take part in the offering.

Alibaba’s Hong Kong-listed shares fell as much as 9.3 per cent on Wednesday.

That puts the shares on track for their worst one-day performance since Alibaba, which relies on Ant’s payments infrastructure for its ecommerce operations, listed in Hong Kong about a year ago. Alibaba’s New York-traded shares closed 8.3 per cent lower on Tuesday.

Analysts said it was difficult to determine how long Ant’s IPO would be suspended.

“Ant’s Shanghai and Hong Kong IPOs will almost certainly return to the market at some point, though the timetable is unclear,” said Andrew Batson, China research director at Gavekal, a research firm. “But the company may well have to make substantial changes to its internal organisation and business model to comply with new regulatory requirements.”

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Beijing’s move to suspend Ant’s IPO came a week after Mr Ma criticised China’s state-owned banks at a financial summit in Shanghai. Mr Ma suggested the country’s big lenders had a “pawnshop mentality” and that Ant was playing an important role in extending credit to innovative but collateral-poor companies and individuals.

The suspension of the IPO also throws into doubt what would have been a bumper payday for Wall Street investment banks and others working on the deal, which were expected to reap at least $300m in fees.

“The deal would have to complete in order to get paid,” said one Hong Kong-based investment banker who worked on the Ant deal. “It is making everyone very nervous,” added an IPO lawyer in the city.

Chinese state media circulated commentaries supporting the suspension of the IPO, saying it was necessary to protect investors and ensure the stability of the country’s financial system.

The state-backed China Securities Journal on Wednesday published an interview with one legal scholar who said the decision was “reasonable and legal”.

Zhang Zixue, a professor at the China University of Political Science and Law, said in the article that regulators were still determining how to best manage the nation’s vast online lending industry.

In a separate commentary published by Xinhua on Monday, Guo Wuping, the head of the consumer protection bureau at China’s central bank, criticised “fintech companies [for] abusing their hegemonic position”. “Rather than taking from the people their data to benefit the people, [they use] it to further some company interests.”

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Ant’s control over huge amounts of data in China has alarmed regulators, which have often struggled to get the group to share its trove of user information.

“Nobody’s saying the business Ant’s doing is fraudulent or illegal,” said Fraser Howie, an independent consultant and expert on China’s financial system.

“The trouble is the regulatory environment in which they’ve built their business — on which they’ve presented a series of financials to investors — is going to change, and change against them,” he added.

Additional reporting by Yuan Yang in Beijing and Primrose Riordan in Hong Kong

Via Financial Times