Ant Group’s much-awaited stock market debut received a huge blow after the Chinese market regulators surprisingly suspended it at the last minute.
The group, which spun out of Alibaba in 2010, was anticipating a record US$34.5 billion debut on the Shanghai Stock Exchange (SSE) and the Stock Exchange of Hong Kong (SEHK).
The suspension came as a shock for many as Ant has long been seen as a champion of China’s economy.
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As per several reports, the plug was pulled on the IPO due to regulatory changes in the fintech space and “possible failure to meet disclosure requirements” by Ant. Its founder Jack Ma’s public criticism last month of financial regulations as stifling innovation could also have acted as a trigger.
e27 spoke to several industry experts in Southeast Asia to know how they look at the overall episode. They all agree that this will send a wrong signal to the investor world out there.
“The suspension demonstrates the depth of complexity of investing in China,” according to Chia Jeng Yang, Principal at Singapore-based VC firm Saison Capital.
“While investors around the world have a lot to learn about the rich Chinese fintech (or techfin) ecosystem, understanding the regulatory and political undercurrents is still an important dimension to being part of the country’s fintech story. As a general lesson, being able to navigate through the developing regulatory frameworks remains an important cornerstone, especially for fintechs in emerging markets,” he says.
For Jasmine Ng, former CEO of Razer Fintech, the decision is a definite blow to investor confidence in Chinese-listed stocks.
“That a regulatory body can allow it to go this far before it pulls the plugs is a huge concern and plays a big impact on investor confidence. I believe moving forward, there needs to be greater transparency to processes before investor confidence can be fully reinstated,” she comments.
The move is unlikely to make an impact on the fintech sector in China, opines Dave Ng, General Partner of Singapore-based new VC firm Altara Ventures. “But what is more important is the potential perception on the Chinese capital market and exchanges instead.”
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When any company plans to go public, there is a lot of preparation and co-ordination required among the different stakeholders, including the management, regulators, relevant authorities, securities exchange and investors. It is a comprehensive process. Hence, when an IPO gets delayed, it will to a certain extent reflect upon the various parties involved.
“In a landmark IPO such as Ant Financials, you can imagine that a lot of work has been done and continues to happen in the backdrop. The temporary setback is such that market participants, especially the international community, will ask if China’s system is ready and comparable to the NYSE or NASDAQ, which I think it is,” he observes. “Even though the Ant IPO is delayed, it could likely take place by Q1 next year.”
“In the meantime, as the various parties work out the kink, it will actually make the eventual process and outcome stronger. That will be the bright spot to look forward to when the IPO does happen,” he concludes.
Ma wanted Ant to be seen as a technology company that closely works with financial institutions and he envisioned less regulations and more freedom under the Chinese laws for the group.
However, as the company grew exponentially, Chinese financial regulators began to feel that its business model of connecting lenders and borrowers should be closely monitored.
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“The whole perception of China’s fintech market won’t change because it has never been a free market to begin with,” says Sergei Filippov, Managing Partner, Morphosis Capital Partners. “Fintech is closely regulated and monitored in every leading country, including China. In all these countries, financial services companies want to be seen as technology firms to enjoy less regulatory oversight.”
He further adds that the IPO halting is a warning for high-level entrepreneurs that every private company should follow the rules of the game and it’s not businesses that set rules in China.
“Business and politics have always been deeply intertwined in China. Additionally, President Xi Jinping is extremely concerned about the safety and stability of China’s financial system, and loosening the control over the Ant lending platform would be seen as a direct risk,” Filippov concludes.
Image Credit: Alipay
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