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A look into Ant Group’s $37 billion IPO suspension in Hong Kong and Shanghai; as bids equivalent to Britain’s annual economic output suspended by regulators

China, on Tuesday, last week, delivered the biggest shock as regulators suspended the much-awaited and the world’s largest IPO, Ant Group’s $37 billion stock market listing.

The financial technology company established by billionaire Jack Ma wanted Ant to be viewed as a technology company, preferably than a highly regulated financial institution.  

However, The Shanghai stock exchange announced that it had suspended its initial public offering (IPO). On Monday, China’s financial regulators told the company’s online lending business would face tighter scrutiny, sources revealed.

The IPO was touted as the world’s largest stock market debut with bids equivalent to Britain’s annual economic output. With just days to go lent a dramatic blow to the financial technology firm and shocked the retail investors.

The suspension followed after the meeting between Ant executives and China’s financial regulators.

Latest developments on to be the world’s largest IPO 

  • As Ant IPO is pulled out of the market, Hong Kong Exchange Shares Fall. 
  • Capital Shortfall needed to be fixed. For sale to go ahead, the company would have to boost capital and re-apply for national licenses.
  • Jack Ma feels the heat as his wealth drops $3 Billion after the freeze of Ant Group IPO.
  • Citigroup Inc and Morgan Stanley face massive windfall. Bankers, on the other hand, reel as Ant IPO collapse threatens $400 Million Payday.
  • Ma’s IPO plans are not as important as China, safeguarding the financial system.
  • Ant IPO was to give competition to Saudi Aramco’s deal marked in 2019

China and Ma’s tussle 

Ma had said at an event last month attended by Chinese regulators that the financial and regulatory system smothered innovation and must be transformed to fuel growth. He further compared the Basel Committee of global banking regulators to “an old man’s club.”

Investors believe that public criticism put Ma in the crosshairs of regulators. China, in a bid to show whose the boss came down heavily on Ant.

Alibaba Group Holding, owns about a third of Ant, fell 9 percent in early US trading, wiping nearly $76 billion (roughly Rs. 5,69,122 crores) off its value. More than double the amount Ant was planning to raise.

Beijing seems to have become uncomfortable with banks increasingly using micro-lenders or third-party technology platforms such as Ant for underwriting loans amid fears of rising defaults and a deterioration in asset quality in a pandemic-hit economy.

Chinese regulators followed suit and began scrutinizing banks that used Ant’s technology platform excessively for underwriting consumer loans as part of a drive to curb risks in the country’s financial sector.

China’s state-backed Economic Daily newspaper said in a commentary that the IPO suspension showed regulators’ determination to protect investors’ interests, and the most pressing matter was for Ant to carry out “rectifications”.

However, China’s move sent shock waves across the world financial market, even as retail investors felt it was a cruel joke. Many said that they were not sure if they would like to subscribe again if Ant lists again. If the business model changes, it might be less attractive than before for them.

Ant apologized to it’s investors for any inconvenience caused. Adding it would give details on the suspension of its listing and applications for refunds as soon as possible.

Jack Ma’s Wealth following the suspension dropped $3 Billion After Ant Group IPO Freeze. The plunge in Alibaba Group Holding Ltd., which owns a third of Ant, has reduced Ma’s fortune.

In its statement, Alibaba said it would continue to support Ant to adapt and embrace the evolving regulatory framework per the Chinese financial regulations.

The three Western banks co-sponsors of Ant’s Hong Kong IPO and CICC, JPMorgan, Citigroup, and Morgan Stanley issued no statement in the wake of suspension.

Chinese regulators’ move is being viewed as a bid to show who’s the boss even though Jack Ma might be considered the richest man in the world. Still, in front of the Chinese Communist Party, it doesn’t matter much.

Jack Ma might have to be careful in the future in his statements and opinions regarding financial and regulatory systems.

Ant in the meantime, to revive its listing is comprehending if it needs to disclose more information to the Shanghai exchange and its relationship with regulators.

Or if the bourse expects it to resolve all its issues with the regulators, which would be a long process.

Irrespective of what Ant chooses to do, the world’s largest and much-awaited IPO, instead of shooting for the stars and becoming the world’s largest financial IPO, has instead not taken off at all!

 

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