The Shanghai Stock Exchange said on Tuesday that it was postponing Ant Group’s $37bn public offering, one day after four Chinese regulators summoned Jack Ma and other Ant executives for an interview.
China’s largest financial technology company was set to list on Thursday in both Shanghai and Hong Kong in a record-breaking IPO.
The stock exchange’s announcement noted Mr Ma, Ant’s founder, had been called in for “supervisory interviews” with Chinese regulators and said there had been “other major issues”, including changes in “the financial technology regulatory environment”.
“This material event may cause your company to fail to meet the issuance and listing conditions or information disclosure requirements,” the exchange said. “Our exchange has decided to postpone the listing of your company.” It told Ant and its underwriters to make an announcement about the suspension.
Shares in Chinese ecommerce group Alibaba, which owns a 33 per cent stake in Ant, were down more than 5 per cent in pre-market trading in New York.
On Monday, Mr Ma, together with Eric Jing and Simon Hu, Ant’s chief executive and chairman, were called in by the People’s Bank of China, as well as China’s banking, securities and foreign exchange regulators. Subsequently, Ant said it would “implement the meeting opinions in depth”.
The meeting came after Mr Ma criticised China’s state-owned banks at a financial summit in Shanghai at the end of October. Mr Ma suggested the big banks had a “pawnshop mentality” and that Ant was playing an important role in extending credit to innovative but collateral-poor companies and individuals.
At the same summit, however, Wang Qishan, China’s vice-president, emphasised the importance of financial stability. “There should be a fine balance between encouraging financial innovation, invigorating the market, opening up the financial sector and building regulatory capacity,” he said. “Safety always comes first.”
Before announcing the timing of the IPO, Ant executives met with PBoC officials this summer to seek their blessing, according to two senior group executives. Despite receiving assurances, there have long been voices sceptical of Ant within the PBoC and China’s banking and insurance regulator, which views itself as the champion of the country’s biggest lenders.
In its prospectus, Ant said it faced regulatory risks in China and that it would have to establish a central bank-approved holding company in accordance with State Council regulations issued in September. Draft regulations suggest Ant will have to cap loans at either Rmb300,000 ($44,843) or one-third of a borrower’s annual pay — whichever is lower.
Oliver Rui, a finance professor at China Europe International Business School, noted that Ant could previously leverage Rmb3bn in capital into Rmb300bn in loans. But under the new guidelines, Ant will need to keep at least 30 per cent of its capital on its balance sheet. “Their future profit will not be as good as it is now,” said Prof Rui.