Daily Management Review

Suspension Of Ant's IPO Could Cut Its Seize And Hit Its Value


Suspension Of Ant's IPO Could Cut Its Seize And Hit Its Value
According to analysts, the chances of getting a public listing for China’s Ant Group is only likely to be delayed instead of being destroyed by the sudden decision of Chinese regulators to suspend the record listing of the company, even though this move will hit the valuation and growth prospects of the financial technology giant.
Analysts view the last minute suspension of the listing by Chinese regulators as an attempt to size down the Ant founder Jack Ma and his financial services empire. However analysts and investors alike believe that the company will eventually get listed at the stock market.
"Ant's business is likely to be restricted by new financial regulations. As a result, the relaunched IPO price will most likely be lowered," said Andrew Collier, managing director of Orient Capital Research.
Because of its efforts to portray itself as a technology giant instead of the financial company, the company has been able to gain in terms of its valuation.  
But parts of its sprawling empire have made Chinese regulators. Such parts include the lucrative online lending business of the company which accounted for about 40 per cent of the total revenues of the company for the first half of this year.
More of their own capital for loans has to be stump up by online lenders in China according to draft rules published on Monday which analysts feel deal give a blow to the business model of Ant. Analysts said that wealth management products will no longer be allowed to be sold by Ant's co-lending subsidiaries Huabei and Jiebei, under the draft rules.
A "major impact" on Ant's business structure and profit model would be dealt with by the recent regulatory changes, said the China Securities Regulatory Commission (CSRC) on Wednesday.
Suspending the initial public offering (IPO) of Ant was a responsible move by the regulator considering both investors and markets, it said.
Billionaire Ma, a former English teacher who founded the e-commerce giant Alibaba Group Holding Ltd and its affiliate Ant which are considered to be two of the biggest success stories for China, was given a stunning rebuke by the suspension of the IPO.
Based on the valuation of Ant shares after the IPO, it was expected that the bet worth of Ma would have almost doubled to $59 billion. On in contrast, after the shares of Alibaba, in which Ma has a stake of 4.8 per cent dropped in New York on the news of the suspension by 8,1 per cent, the net worth of Ma is expected to have dwindled by about $3 billion.
According to reports quoting sources, the decision to suspend the UIPO of Ant was taken by the Shanghai stock exchange after consultations with China's financial regulators and executives from the company which included Ma. In the meeting the stock exchange and Ant executives were told that tighter scrutiny would be accorded to the company's online lending business.
It is however not know what the exact nature of the concerns of the regulators were and the potential duration of the suspension. A material event that could cause Ant to be disqualified from listing, said the Shanghai bourse while describing the meeting.