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Two years ago, Chinese regulators torpedoed Ant Group Co.’s supposed record IPO, sending shock waves across global capital markets. New rules have been imposed on the fintech giant, which ranges from consumer lending to wealth management to online payments. The result is that the once fertile landscape for web-based financial services has changed drastically in the government’s effort to take control of the entire tech sector. The big question now is whether Ant, currently controlled by billionaire Jack Ma, China’s most famous entrepreneur, will get another chance to go public.
1. What would have to happen for Ant to go public?
The most important thing is to create a financial holding like a regular bank. His application for such a license with the central bank is nearing the final stages of approval, people familiar with the matter said in June. Ant would then need approval from China’s securities regulator to be listed in either Shanghai or Hong Kong (the failed 2020 plan was to list in both cities at the same time). While not officially part of the process, in reality it would also require the blessing of senior Chinese leaders and a variety of government agencies. These include the Financial Stability and Development Committee, which is headed by President Xi Jinping’s confidant, Vice Premier Liu He. The Central Bank and Treasury are part of this group.
2. What are the regulators saying?
Signals were mixed. According to Bloomberg News interlocutors, financial regulators have held preliminary talks about reviving an Ant IPO. One of them said the CSRC had set up a team to reassess Ant’s plans. On the same day, Reuters reported that China’s central leadership gave a first nod to resuming Ant’s listing plans in both Shanghai and Hong Kong. The CSRC dampened hopes that anything was imminent when it denied it was conducting review and research on Ant’s IPO. However, it added that it supports eligible platform companies going public in China and abroad.
3. What did Ant do?
Chairman Eric Jing said last year that the company would eventually go public, but in June it said it had no plans to go public just yet. Ant has rebalanced its business to meet the demands of China’s watchdogs, who have pledged to stem the “reckless” advance of tech companies into the financial sector. In April 2021, the central bank also asked Ant to open up its payments app to competitors and sever “illegal connections” that were directing users to more lucrative services like lending. Ant also launched a consumer finance division that went live last year, with new rules limiting their ability to lend. Consumer lending, which was co-originated with banks – previously a key engine of growth – has been separated from the Jiebei and Huabei brands. Assets under management at its Yu’ebao money market fund — once the world’s largest — fell 15% year on year to 825 billion yuan ($123 billion) in March.
While Ant was valued at $280 billion pre-IPO based on its share prices, the myriad of regulations imposed over the past two years mean it’s now worth a fraction of that as it’s now more “fin”. as “tech” is. Growth and margin expectations are generally lower for banks than for technology companies. Fidelity Investments, for example, lowered its valuation estimate for the company from $235 billion to about $78 billion last year just before abruptly halting its IPO. In June, Bloomberg Intelligence analyst Francis Chan estimated Ant was worth about $64 billion.
5. What would be included in a listed version of Ant?
Ant will probably use the financial holding for the IPO. The central bank last year asked Ant to fold all financial operations into this entity, which is regulated more like a bank. Among them is Ant’s payments business Alipay, which in 2020 had 711 million active users, mostly in China, who use it to buy everything from a quick coffee to real estate, and over a year’s worth of $17 trillion in payments generated dollars. It could also include Ant’s wealth management, credit scoring, and consumer lending businesses. However, it’s unclear what the final structure will be and whether there needs to be even more separation between Ant’s payments and other companies. Ant was instructed to build firewalls to block direct traffic between Alipay and its other services like wealth management, returning to its roots as a payment services provider.
5. What does this mean in a broader sense?
The cancellation of Ant’s IPO triggered a flurry of regulatory measures that have changed the playbook for the nation’s tech champions, who had prioritized growth at any cost. In response to Xi’s and the party’s evolving stance on big tech in general, and control over the vast pools of user data held by private sector companies in particular, who viewed it as a potential threat to national security, the global Markets falter. Some big banks went so far as to describe Chinese tech stocks as “uninvestable.” Recently, however, the tone from Beijing has changed. Vice Premier Liu, Xi’s top economic adviser, made an unusual public showing of his support for digital platform companies in May.
6. What happened to Jack Ma?
The co-founder of Alibaba Group Holding Ltd., which became Ant, used to be one of China’s most prolific entrepreneurs. He largely disappeared from public view after delivering a speech criticizing regulators on the eve of Ant’s failed IPO, but has been spotted touring Europe this year. Once the richest man in China, Ma’s personal wealth took a big hit during the tech sell-off. Still, the 57-year-old was worth $36.4 billion at the end of July, according to the Bloomberg Billionaires Index. Ma has told Alibaba’s board of directors that he intends to reduce his economic stake in Ant to no more than 8.8% “over time,” according to a company filing. Despite not having a management title at Ant, he held 50.52% of the company’s voting rights at the end of July. Many of his peers have also left their formal corporate functions and increased their charitable giving to align with Xi’s vision of “shared prosperity.”
• More QuickTakes on China’s tech crackdown and what happened to Didi Global Inc., as well as Jack Ma and Alibaba recaps.
• A comprehensive look at the next steps for fintech in China.
• Bloomberg Intelligence analyzes what an IPO of Ant would mean for China.
• Bloomberg Opinion’s Shuli Ren asks why China is still scrutinizing Ma.
For more stories like this, visit bloomberg.com
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