Shanghai stock exchange suspends Ant Group's A-share IPO

https://de.reuters.com/article/ant-group-ipo/shanghai-stock-exchange-suspends-ant-groups-a-share-ipo-idUSP8N2HK04R

by ytch • 6 years ago

238 113 6 years ago

de.reuters.com

JMY1• 6 years ago

Jack Ma had a speech against Chinese financial regulation on last weekend. I guess this must be the main reason ...

almost_usual• 6 years ago

He probably didn’t do himself any favors speaking out about it ahead of time..

conistonwater• 6 years ago

Ant Group has recently reported to China’s securities regulator about the significantly changes in regulatory environment, the exchange said, and this major development might make Ant Group fall short of the listing requirement regarding information disclosure

What does this mean? Does this sentence even say anything?

netheril962• 6 years ago

China just put out a new set of regulation that will severely dampen the leverage available to Ant, and thus dampen their revenue and profit significantly. That will in turn lead to significant downvaluing of its stocks.

So, the next step for the Chinese regulators is to suspend the whole thing for the dust to settle.

garmaine• 6 years ago

Or the right bribes to be made.

chenzhekl• 6 years ago

This link provides more information: https://www.reuters.com/article/us-ant-group-ipo/ant-groups-...

balola8• 6 years ago

It's an unusual move, but the whole IPO is odd.

IPO at its relative late stage with a gigantic valuation, leaving little for retail investors to gain from. And its whole IPO process is preferential treatment at its finest, almost looked like Jack Ma can do whatever he wanted.

Ant and Ma's condescending posture did draw a fairly big backlash, it's certain pratices border on non-compliance, and Ma's beneficiaries are mostly from the last leadership, these probably helped put a brake on it.

MattGaiser• 6 years ago

IPO at its relative late stage with a gigantic valuation, leaving little for retail investors to gain from.

Isn't this just following a trend for larger and later IPOs?

https://www.vox.com/2014/9/11/6134529/a-new-york-stock-excha...

balola8• 6 years ago

Americans markets have been booming for the past 10 years, relatively robust and "policed", it also has something to do with the dollar dominance, so they kind of can take these bets?

But it's not the case for Chinese domestic markets.

conjectures• 6 years ago

The IPO was a sensational draw for China’s retail investors who bid a record $3 trillion, equivalent to the entire annual economic output, for shares in the fintech giant.

:o that sounds quite frothy.

est• 6 years ago

It's an unusual move, but the whole IPO is odd.

In the IPO files Ant Group declared itself as a "tech company" under supervision of Ministry of Cyberspace. LOL

ibic• 6 years ago

HKEX followed suit also.

dtwest2• 6 years ago

Isn't China shooting themselves in the foot here?

I don't know the details of the situation so I'd be happy to hear from someone who knows more, but this deal could've been a huge win for Chinese financial markets. Down the road, unexpected government action like this could hurt investor confidence and depress the amount of money Chinese companies will be able to raise from foreign investors.

balola8• 6 years ago

Its gigantic valuation most likely will face a harsh test, one that the fragile domestic market can hardly afford, a risk that worries the administration who has been desperately propping it up that also hopes it can fund China's tech self-reliance. Such listings didn't bode well in the past, with SMIC being the lastest example.

At its core, Ant is more of a lending company, re-distributing money it got from banks at much higher interest rates (typically 15%, some banks offer personal credit loans at around 4%) and leverage. Tho it insists on it's high-tech, in order to boost valuation and avoid financial regulation, but how many more debt can the population pile on itself?

Sidenote: Its business model profits from people that traditional banks snubed, mostly from lower social classes.

fakedang• 6 years ago

In India, we called them moneylenders and it carries a jail term to engage in such activities. Good to see Wall Street and the West lap up such usurious companies.

Aperocky2• 6 years ago

You probably think US trying to regulate big tech is also self shooting?

It's not, a healthy market need to curtail monopolies. Granted, it's no longer early 20th century and you can't just break them up like Standard Oil because that doesn't make any sense, but regulations are sorely needed across the pond.

dtwest2• 6 years ago

No, that's not what I think.

In Ant's case, it is the unexpected nature of the action and lack of transparency that I see as damaging. Not necessarily the action itself. I'm still trying to learn what is going on and why, I haven't made a judgement on the action itself.

powerapple6• 6 years ago

Also note that various government funds also are holding stakes in Ant group.

justicezyx3• 6 years ago

Indulged in the picture of financial boom, yet forgot the havoc raged by the greed? Modern financial is rarely useful for society. Even the VC community largely becomes rent seekers who monopolize new entrepreneurs, instead of really taking high impact long term bet.

Jack Ma appears mixing modern tech with his own idea about the financial system. Watching his onstage chat with Elon Musk and WAI 2020 shows that he is not interested so much of using tech to innovate, and his true interests might be in using tech to manage and control. Not too surprising for a tech baron raised in a totalitarian country.

duxup• 6 years ago

I wonder if some in China are worried about the opposite.

Ant has trouble of some sort and it hits home hard.

I agree about unpredictable regulations, but I thought that was kinda the status quo there anyway.

whatok3• 6 years ago

There's a regulatory draft that requires small business lenders like Ant to warehouse 30% of the loans they originate vs the 2% that they currently have on balance sheet. This draft was disclosed after regulators met with Jack Ma and other Ant executives. No clue why this was only done now but this significantly changes valuations.

thedudeabides5• 6 years ago

Thanks, first I’m seeing anyone report this as the reason.

The 2% they were operating under was a joke (less than 1/3rd Lehman’s capitalization), 30% on the other hand, seems outright punitive if true.

Timing is weird too.

whatok3• 6 years ago

The timing makes sense if it is in response to his recent remarks but the regulation is extremely punitive vs potential outcome if this IPO gets botched.

netheril962• 6 years ago

I don’t think it is punitive. Ant primarily lends to individuals without any collateral. Those are inherently high risk debts and thus needs more safeguards.

112012123• 6 years ago

This is a little different than what Lehman got in trouble for in the US.

During the financial crisis, the core issue is that banks were making loans off their own balance sheet with reserves too small to cover the losses that eventually occurred. In other words, when borrowers defaulted the bank itself lost money. This made them insolvent and caused the whole collapse.

In the case of Ant on the other hand, they essentially function as a lead generation platform for banks - currently 98% of "their loans" aren't really theirs at all, but rather are funded by their partner banks; if the loan defaults, it's the partner bank's problem, not Ant's.

The reason this change is such a big deal is that forcing Ant to fund 30% of its own loans will require raising an absolutely enormous amount of fairly expensive capital, driving up costs and significantly decreasing the value of the company.

secretasiandan• 6 years ago

how do you determine the punitive capitalization ratio for non-capitalist regulation?

powerapple6• 6 years ago

The timing is weird because, in my opinion, that Ant rush to IPO after knowing the policy is going to come in effect soon. There were almost 3k fintech (p2p lenders), the government has been restricting the market, now there are 15 of them.

dclusin• 6 years ago

I remember reading Jack Ma is on record describing large Chinese bank business models as analogous to pawn shops and in general criticizing regulators. Probably had something to do with it.

justicezyx3• 6 years ago

I mean, no one can expect different thoughts from financial gamblers. Jack Ma was totally a non innovative person. Like his whole enterprise so far is following western examples and the playbook. Now he is happily adopting the financial revolution narrative, disguised under the tech innovator facade.

xster• 6 years ago

If you listen to his whole speech, he's making a lot of very generalized criticisms on China's financial regulatory systems, which as a whole aren't inaccurate. But you're left wondering at the end how does it specifically relate with what he's concretely asking for (which presumably is just increasing the specific rate at which "JieBei" short-term debts can be repackaged and re-securitized). In other words, it just seems like a big obfuscation and dance around to ask for neoliberalism without saying the word and strawmanning the flip side as obsolete "pawn shop mentality".

Granted, regulatory hurdles this late in the process seems super opaque and vindictive. But on the flip side, leveraging debt at this level seems like a massive systemic risk to the social order considering the risk ratings on the repackaged security will be equally opaque within the Ant debt product offerings. It's fascinating seeing this as China more or less writing Glass-Steagall on the fly the day before the IPO. Despite it looking like 2 kids fighting over an ice cream, I think it'll be massively consequential in A) demonstrating leveraging on new forms of financial instruments like ML-driven peer-to-peer lending based on massive amounts of Ant/Alibaba consumer data, and B) it being a fork in the road on China setting a precedent on neoliberalism or politics controlling capital.

wazokazi• 6 years ago

From what I can gather from public information, the loan volume is ~$300B/year and growing rapidly. If they have to hold a 3rd of that on their books, that’s a lot of capital they have come up with. And maintain a loss reserve. I guess, they are being asked to become a bank.

robotresearcher2• 6 years ago

Alibaba stock is down >8% today, and a bunch of people must have known about this issue in advance. Smells bad.

Leary• 6 years ago

the news came out before the market opened in the US

powerapple6• 6 years ago

https://sg.news.yahoo.com/china-p2p-financial-refugees-face-...

the 2% is not what they have on their balance. 2% of the total loan was from Ant group money, the rest 98% money are from banks and ABS.

Government has been restricting consumer borrowing for a few years now. Consumer borrowing is discouraged. It was easy money for tech companies, almost all tech companies are in this business including Tencent, Baidu, JD, 360 and so on.

jonathannat3• 6 years ago

A couple of guesses here

a. Ant group is partially owned by a large group of elite foreign investors https://www.wsj.com/articles/ant-ipo-promises-8-billion-gain..., who will gain hugely from this IPO. The Chinese government doesn't want such a huge financial entity owned by foreign owners (even though they have claimed they are allowing more foreign entries in financial sectors). Also, China is suffering from dollar shortage/flight (foreign manufacturing moving out, foreign retailers moving in), and this IPO could exacerbate it

b. Jack Ma recently criticized the Chinese banks https://www.pymnts.com/news/ipo/2020/jack-ma-summoned-for-qu.... This is a big no no right now, especially since Xi's dictatorship is wobbly. Also this is what happens when you upset the world's largest mafia - Chinese government and Chinese state owned companies. Just look at what happened to Australia https://www.abc.net.au/news/2020-11-03/china-broadens-trade-..., South Korea https://www.vox.com/latest-news/2017/3/3/14795636/china-sout... US https://www.defensenews.com/global/asia-pacific/2020/10/26/c... and Japan https://www.nytimes.com/2010/09/23/business/global/23rare.ht...

c. There is probably a lot of financial misreporting within Ant Group, as it is pretty commonplace for Chinese public companies - check out recently delisted Chinese companies in US stock exchanges. If this IPO is allowed to expand, that's game over for shanghai stock exchange sooner than later.

(if you ask me, why would anyone invest in any mafia pyramid scheme with no guarantee you'll get your money out...)

Aperocky2• 6 years ago

Ant is definitely not a pyramid scheme, if you've ever been to China you'd know.

But b. is very credible. Jack has been criticized by state media as he piled negative comments to the regulators and traditional lenders - and frankly the regulators were right. Ant essentially needs no deposit to lend, relying on big data and not any traditional financial safety instruments. It's been overlooked for a while but when you get the big benefit of living outside of regulations you shut up and take what you get, and not making a public fuss about how 'every bank is stupid for following regulations'.

jonathannat3• 6 years ago

your first sentence contradicts your second paragraph :)

Ant is definitely not a pyramid scheme, if you've ever been to China you'd know.
frankly the regulators were right. Ant essentially needs no deposit to lend

pjc50• 6 years ago

Ant essentially needs no deposit to lend,

Not necessarily deposits but reserves; the whole European financial crisis of 2008+ was over the question of "what IS the minimum reserve level for systemic safety?"?

relying on big data and not any traditional financial safety instruments

This is the Boeing 737-MAX approach: it's not intrinsically safe, but we can cover its shortcomings with software.

seanmcdirmid3• 6 years ago

Ant is definitely not a pyramid scheme, if you've ever been to China you'd know.

As someone who lived in China for 9 years, these kinds of arguments are always really vacuous. Perhaps just say Ant isn't like Amway and has a low fraud rate (for China, anyways), which is probably enough to deflect the pyramid scheme argument without resorting to an authority fallacy.

justinzollars• 6 years ago

Ant is definitely not a pyramid scheme, if you've ever been to China you'd know.

I have been to China. As a foreigner I was not able to use any digital cash technologies (such as WeChat or Alipay). Did you have a Chinese bank account? How were you able to use Ant tech?

powerapple6• 6 years ago

The sales of shares privately to a group investors in 2018 sounds very dodgy to me. Frankly, listing the company in Shanghai Exchange will give it a much higher valuable than in an US exchange.

jonathannat3• 6 years ago

Right now Ant Group's valuation is way lower than their IPO price. It could even be bankrupt and be nationalized, depending on investigations into their books, and what the Chinese government feels like that day.

There won't be any Chinese luckin coffee shaninigans in US exchange by end of 2021, according to new accounting standards https://www.thenationalnews.com/business/markets/us-to-delis.... Also, expect a large wave of Chinese companies delisting in 2021.

Friendly warning: check your mutual and index funds exposure to Chinese companies on US exchanges.

disown2• 6 years ago

A couple of guesses here

Let me guess, it's going to be the mindless propaganda that you've been brainwashed with via tradional and social media. Let's find out.

The Chinese government doesn't want such a huge financial entity owned by foreign owners (even though they have claimed they are allowing more foreign entries in financial sectors). Also, China is suffering from dollar shortage/flight (foreign manufacturing moving out, foreign retailers moving in), and this IPO could exacerbate it

If china is facing "dollar shortage", then why would they ban foreign money? Wouldn't they want more dollars? Also, don't people like you claim that china owns us because they own so much of our debt? If so, how can they be experiencing dollar shortage if they own over $1 trillion of US bonds? Also they are not allowing more "foreign entries" in financial sector but they are allowing more foreign entries in retail? Finally, if you think an IPO is going to affect "dollar shortage" issue, then you haven't a clue what you are talking about. What about all the other major tech IPOs, like BABA, which had significant foreign investment. Not to mention all the foreign venture capitalists in china? Why isn't china kicking them out? Has china banned foreign investment/capital?

This is a big no no right now, especially since Xi's dictatorship is wobbly.

I thought he was an "emperor" for life. Now his "dictatorship" is wobbly? Be consistent. What's next? You are going to call him a mafia boss?

check out recently delisted Chinese companies in US stock exchanges.

Is it misreporting or is it the trade war?

https://www.reuters.com/article/us-usa-trade-china-limits-id...

If what you are saying is correct, why isn't the other company affiliated with Jack Ma ( BABA ) delisted?

(if you ask me, why would anyone invest in any mafia pyramid scheme with no guarantee you'll get your money out...)

But you were just complaining that "even though they have claimed they are allowing more foreign entries in financial sectors".

On the one hand, you are whining that the chinese aren't allowing more financial entries into their market. And then you claim that it's a mafia pyramid scheme that nobody should invest in. Shouldn't you be praising china for keeping "foreign entries" out of their "mafia pyramid scheme"? Once again, be consistent. Another student of peter navarro at the gordon chang's school of propaganda.

FooBarWidget2• 6 years ago

Not too long ago, many people on HN were deliberating on how Ant is a national security threat because Jack Ma is a CCP member, implying that Ant is basically a state-controlled organization. I wonder what those people have to say now.

Right now I am neither arguing whether it is or isn't a national security concern. I just want to highlight that people's general understanding of how things work in China is very poor, and that one should be careful with speculations like that. At the very least I think more people should recognize that the Chinese government and the CCP are not monoliths, and that the distance between "the boss of the company is a CCP member" and "the company is state-controlled" is larger than what many think.

osobear• 6 years ago

I thought he was an "emperor" for life. Now his "dictatorship" is wobbly? Be consistent. What's next? You are going to call him a mafia boss?

Xi did arrange himself a lifetime position. And yes, a dictatorship's stability can fluctuate.

coolgod• 6 years ago

Schrödinger's China: China is fake communist country, except when they try to regulate financial markets to better serve the masses.

karmasimida• 6 years ago

Also, China is suffering from dollar shortage/flight (foreign manufacturing moving out, foreign retailers moving in)

No longer the case after COVID pandemic, Yuan is appericating

The Chinese government doesn't want such a huge financial entity owned by foreign owners

Ant had been allowed to exist for a long time, I don't see this really as an issue.

TBH, b. is probably the most likely reason. Criticizing governmental authority is a dangerous act even for Jack Ma, especially when your business needs its blessing.

Also Ant's IPO had caused quite a lot of controversy even before this, like selling their own shares through Alipay, etc.

Anyway, I see this an isolated case, where the CN government wants to give Jack Ma a lesson to put him in place.

beaunative4• 6 years ago

For A, it's not possible to for Ant group's listing to exacerbate China's dollar shortage, as Ant's business is done in CNY and investors would be trading in CNY, at least for it's Shanghai listing.

kgilpin• 6 years ago

How can Jack Ma belong to the Chinese communist party, and also own a huge company? Does communism not mean what it used to mean any more?

nsriv• 6 years ago

The Chinese Communist Party has been transitioning to the idea of state capitalism for decades now.

baybal2• 6 years ago

Not since the three represents.

redis_mlc• 6 years ago

How can Jack Ma belong to the Chinese communist party, and also own a huge company? Does communism not mean what it used to mean any more?

- to own a huge company in China, you would have to be a member of the CCP. Otherwise it would be stripped from you and you would be jailed.

- as of 2019, companies over 50 employees have a CCP cell in their office. The CCP is now going after even smaller companies in 2020.

- communism is totalitarianism. That means the society is strictly controlled top-down, from Dragon Families/Xi to the lowest peasant. The families pillage China on a national scale (Three Gorges power generation revenue, etc.), while the CCP has ultimate control of literally everything else.

- China has had tremendous growth, funded by the West, but aggressively-managed by local officials with KPIs, etc.

- the CCP is modelled on the Soviet Union, but on steroids

- It's reported that the top 100 CCP officials have personal wealth of around $2 billion each.

nitrobeast• 6 years ago

There seem to be at least two large factions in CCP when dealing with Ant Financial. In exaggerated terms: 1. The statists who want strict control over financial giants like Ant Financial. They created the new regulations. 2. The neo liberals who are much friendlier to capitalists. They helped rush through the IPO.

My guess is that neo liberals got wind of the impending regulations, which is the reason for the rushed IPO schedule and Jack Ma’s criticism of Chinese and international banking systems.

ngcc_hk2• 6 years ago

Not just a share but also h share where the world including USA should concern about, as your money might be involved.

Shanghai stock exchange suspends Ant Group's A-share IPO

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