Jack Ma fell to earth and took Ant's mega IPO with him

https://www.reuters.com/article/ant-group-ipo-suspension-regulators/how-billionaire-jack-ma-fell-to-earth-and-took-ants-mega-ipo-with-him-idUSKBN27L2GX

by Tenoke • 6 years ago

254 222 6 years ago

reuters.com

arcticbull7• 6 years ago

Honestly I lost all respect for Ma when I watched him debate Elon on the topic of AI last April [1]. Elon just ran circles around him. Like, Elon was playing chess and Ma was playing hopscotch with a football helmet and padded gloves.

That video gave me a lot of insight into Ma's character, and frankly, the contents of the article were thoroughly unsurprising in that context.

[1] https://www.youtube.com/watch?v=WSKYWu-S2G0

threatofrain• 6 years ago

It's extremely difficult to say that Jack Ma is an idiot because of his discussion with Elon Musk. Jack Ma has to play a parallel game of high-stakes political poker.

not_a_moth• 6 years ago

Given that Jack Ma has been a member of the CCP since the 80s [1] I think his success has come a lot easier than Western entrepreneurs

[1] https://www.cnbc.com/2018/11/27/alibabas-jack-ma-has-been-co...

reitzensteinm4• 6 years ago

And do it in a non native language.

In Germany my friends spoke very good English, but there were still times they'd sound like the drunken ramblings of a native speaker.

Only later on I'd realize the points they were trying to make and that they were running rings around me intellectually, just having trouble expressing it.

That experience has left me more or less giving a free pass to ESL speakers saying things that sound dumb, especially when it's off the cuff.

scotty79• 6 years ago

I wonder how different would the conversation feel if it was done in chinese not english.

ddorian43• 6 years ago

He can do it with Zuckerberg. Pretty sure the result would be the same.

arcticbull7• 6 years ago

I think that’s underselling Ma, who was an English teacher, graduated with an English degree and was an English lecturer at university.

blackbear_• 6 years ago

This is interesting because I felt the exact opposite, seeing Musk babbling incoherent ideas and Ma with a clear vision of AI's future.

Darmody2• 6 years ago

I remember watching some of his stuff and thinking, the guy knows his stuff. But then I started watching more and it didn't make sense.

He sounds more like some kind of new age guru or a motivational speaker rather than someone with a good insight into the future.

He's probably in the position he is because he bows down to the CCP.

arcticbull7• 6 years ago

My thoughts exactly. Bowed down -- and then got too big for his britches maybe, and forgot who was actually in charge.

approxim8ion• 6 years ago

I feel the same about most pundits and billionaire "visionaries" touted today, to be honest. Including Elon.

comboy• 6 years ago

I remember this one and I’m pretty certain he is not that stupid. Must have been political pressure. Maybe AI is/was taboo.

tpmx2• 6 years ago

AI isn't/wasn't taboo there - the opposite, rather.

https://becominghuman.ai/china-aims-to-be-a-leader-in-ai-by-...

TenJack• 6 years ago

I wonder if he just doesn't have a good enough grasp of the English language to articulate his ideas well enough. I would go as far to say that no self-made billionaire is stupid.

arcticbull7• 6 years ago

I would go as far to say that no self-made billionaire is stupid.

Making money is far more about luck than skill. Always has been. Net worth is not a proxy for ability.

[edit] Don't get me wrong I'm not saying billionaires are idiots. I'm just saying that having a fat stack is not in and of itself a proxy for aptitude. Judge that on the person instead. Just judging them on their bank balance is an unnecessary appeal to authority that hasn't historically held.

AJRF• 6 years ago

His grasp of English is pretty decent, he was a lecturer at Hangzhou Dianzi University in English and International trade.

throwaway29303• 6 years ago

From the article:

  Ma, a former English teacher, is one of China’s internet pioneers, building an e-commerce empire with Alibaba and a fintech giant with Ant.

onetimemanytime• 6 years ago

>I would go as far to say that no self-made billionaire is stupid.

Stupid is a loaded word, but you can be a genius in chemistry and not be able to hold a "normal" conversation. You can also be homeless and super-smart.

franklampard3• 6 years ago

He would say exactly the same stuff in Chinese. He is just arrogant and abusive.

manigandham3• 6 years ago

Can Ma even speak freely? I find it hard to judge a conversation when one of them is under incredible political pressure by a powerful regime that has no problem squashing him at any time.

cambalache2• 6 years ago

Sure, but to be honest Elon Musk is neither a person worth listening regarding AI.

hungryhobo3• 6 years ago

Agreed

ffpip• 6 years ago

The first comment made me laugh.

''He's not stupid. He just has a lot of Alibaba Intelligence.''

Jack Ma had said AI is Alibaba Intelligence

knolax• 6 years ago

Sums up the HN mentality to me. "some foreign business exec didn't correctly decipher a cryptic technical abbreviation that only exists in my language correctly? What an idiot".

franklampard3• 6 years ago

He is also a proponent of 996. Zero respect

dredmorbius• 6 years ago

For those unaware:

https://en.wikipedia.org/wiki/996_working_hour_system

https://www.cnn.com/2019/04/15/business/jack-ma-996-china/in...

gonehome• 6 years ago

Same for me - after seeing that I became convinced he's just some figurehead the CCP put there in what's ultimately a government funded/run business.

I wasn't surprised when they removed him.

vmurthy3• 6 years ago

Colour me biased but how is innovation supposed to thrive in an environment where a "miscalculated talk" is enough to halt a $37b IPO? I had heard Matt Ridley speak about how [0] innovation thrives where there is "freedom" and gives me doubts about China's capabilities to innovate as much as it wants to.

[0] https://www.aier.org/article/matt-ridley-on-innovation/

mochialex• 6 years ago

You are free to grow as much as you can until it’s time to harvest

aabhay• 6 years ago

I think this is definitely the western assumption from events like this, that the regulators want a cut, etc. The real risk here is that once you grow big enough to pose a real risk to economic stability, AND you are clearly not publicly pledging your fealty to the state, then you get 'out of control' and Chinese culture would support reining you in. While this may seem corrupt to the US lens, I personally have to admit that this kind of action strikes me as politically savvy. Regulate before Jack makes the statement, and it seems like stifling innovation; don't regulate at all, and the capitalists gain power.

kristianov• 6 years ago

On the other hand I also hope the financial elites would stop innovating with shits like "sub prime".

ur-whale• 6 years ago

It all depends on what kind of "freedom" one talks about.

If it's things like free speech and a wide and colorful political spectrum, then yes, China basically has no freedom.

But if it's economic freedom, China has way more than most western countries.

Remains to be seen which kind matters for innovation.

vmurthy3• 6 years ago

Given that free speech/free flow of information is a fundamental building block even to economic innovation, I'd say this matters more. You can have all the economic innovation in the world but if it offends a party, it's unlikely to be widely adopted isn't it?

seniorivn2• 6 years ago

it's not necessarily about who has more it's probably about who has enough freedoms of all kinds

and we have a situation where political freedoms a shrinking every where with different speeds and from different starting points, economic freedoms are moving in different directions all over the world even inside big countries.

without a very complex model of all of it it's nearly impossible to tell what combination is the most favorable to a particular kind of innovation(for example face recognition might be a lot harder to innovate in a country with great political freedoms regardless of economic freedoms).

wombatmobile• 6 years ago

how is innovation supposed to thrive in an environment where a "miscalculated talk" is enough to halt a $37b IPO?

Wait and see. This is just one week in a 20 year journey.

Ma hasn't lost anything.

franklampard3• 6 years ago

Mobile payment and other real innovations aren’t killed. But please don’t count risky lending as innovation: it has to be regulated.

jayparth• 6 years ago

Innovation can make lending that seems risky to one party significantly less risky to another.

Example: you think lending to folks with low credit scores is a risk, but I evaluate credit in a different way that lets me discover that some folks with low credit scores really are credit worthy.

Note that I am not supporting Ant Financial with my comment. I have no clue how their business works. But your comment is missing a key point.

javert• 6 years ago

What do you think the bond market is, if not risky lending? It's pretty much the engine of our civilization.

gcatalfamo2• 6 years ago

China has nothing against innovation. They just want to decide who gets rich with it and how much.

JumpCrisscross9• 6 years ago

China has nothing against innovation. They just want to decide who gets rich with it and how much.

Is this sarcasm?

If I am ambitious, why would I be an innovator in this system? Versus the person deciding who gets rich?

whoevercares3• 6 years ago

The truth is Chinese system is also quite flexible at all levels and people commonly do not follow the rules or use different interpretations and implementations (at very least they workaround a lot). The audit system for many industries are not mature as well.

So yea ironically if you are a Chinese innovator at early stage you might find there’s much less restrictions in China to innovate (not necessarily from moral high ground as long as it’s lucrative ) than the US. Later you become big and draw more attentions but hopefully you know how to play by the rules. I personally don’t think it will make early stage innovation harder

andreilys• 6 years ago

Except when your early innovation threatens an incumbent who has party connections.

I imagine those scenarios don’t go well for the early innovators unless they themselves have a party sponsor that out ranks the incumbent.

bigmattystyles• 6 years ago

> The audit system for many industries are not mature as well.

So bribery? Is that what you mean?

sgt101• 6 years ago

Is that the Matt Ridley that destroyed the Northern Rock bank while being chairman of it for 3 years ? His time culminating in the first run on a British Bank for 70 years and forced nationalization?

I genuinely would not pay attention to one word he says or writes, it bewilders me that anyone does.

duxup2• 6 years ago

I think freedom to innovate and non free nations tend to be SOMEWHAT conflicting things yes.

Having said that, I think China's concern may at least partly really be regulatory in nature ... or I suspect they would have good reason to be concerned. (I really don't know their motivations)

Ant doesn't like / want to be a pawn shop... kinda makes you wonder what if anything their loans are backed by / what would happen if they grew even bigger and imploded.

geodel3• 6 years ago

Yup, I wonder why US stifling innovation by putting regulation on what people can say on YT/Twitter/FB etc.

cryptica• 6 years ago

The global tech industry is a farce. There hasn't been any real innovation in a decade. It's top-down, bureaucratic, government-oriented, debt-fueled, hype-driven, risk-averse... It's not just that there is no innovation; people forgot what innovation means.

Jack Ma is right in pointing out and then proving to us how terribly financialized the world economy has become (it's not just China). The stock market has nothing to do with the economy, it's financial (and political) theatre.

dirtyid• 6 years ago

The environment built a company that could have IPO'ed for 37B. That's more than what most systems can accomplish, and on balance that may be enough, or ability to limit is even favourable.

SkyMarshal2• 6 years ago

how is innovation supposed to thrive in an environment where a "miscalculated talk" is enough to halt a $37b IPO?

Fwiw that can happen in the US too. If a corporate exec says something unwise during the pre-IPO quiet period, the IPO can potentially be scrapped.

And there other consequences to unwise public statements, like when Elon Musk publicly claimed he had a major new deal, which moved markets and then turned out to be a lie. He got bitch-slapped by the SEC for that.

rjsw• 6 years ago

Matt Ridley certainly made maximum use of the "freedom" that was available to him.

justicezyx6• 6 years ago

ANT practices a surveillance backed micro financial lending for consumers.

How can that innovation justify the astronomical risks?

sfifs3• 6 years ago

Well from actually regularly visiting China and having a team reporting to me on ground, i don't think lack of innovation is remotely the problm in China. In terms of a digitised economic model impacting regular Joes,m China is a few years ahead of where other markets are.

When drawing conclusions, it's a good idea to test theories against hard evidence - BOTH factual and counter factual.

Think tanks are notorious for cherry picking the factual evidence and ignoring inconvenient counter factual evidence due to the nature of their mission. That's the reason think tank reports don't make the grade of peer reviewed articles in prestigious academic journals.

xibalba• 6 years ago

i don't think lack of innovation is remotely the problm in China

From your on the ground experience, what do you think is the problem?

mola4• 6 years ago

Yup, Think tanks devolved to (or started as?) propaganda machines. Nothing more.

vmurthy3• 6 years ago

Thank you for this. I didn't remotely say that China isn't innovating. I meant to say that if China has ambitions of becoming a world leader in innovation, this kind of party sponsored innovation / innovators isn't probably the right way to go.

klelatti• 6 years ago

I'm sure you're not aware but quoting Matt Ridley is deeply ironic given he was chairman of a UK Bank with an innovative business model. Quoting Wikipedia:

"Under non-executive chairman Matt Ridley and Chief Executive Adam Applegarth, Northern Rock had a business plan which involved borrowing heavily in the UK and international money markets, extending mortgages to customers based on this funding, and then re-selling these mortgages on international capital markets, in a process known as securitisation.

On 14 September 2007, the bank sought and received a liquidity support facility from the Bank of England, to replace funds it was unable to raise from the money market. Reporting of this complex scenario led to panic among individual depositors, who feared that their savings might not be available should Northern Rock go into receivership. The result was a bank run – the UK's first in 150 years – where depositors lined up outside the bank to withdraw all of their savings as quickly as possible, particularly since many others were doing the same."

oefrha3• 6 years ago

It’s certainly weird to deliver a speech about how you operate in the gray area of regulations to facilitate risky loans and you’re proud of it and regulators are all wrong when said regulators are sitting in the audience...

mcintyre1994• 6 years ago

Where did you read about the content of the speech out of interest? The article linked is pretty vague and makes it sound like he just over-aggressively criticised regulation and said there should be reform, which is just what every billionaire business owner says about the regulations in their space.

oefrha3• 6 years ago

I haven’t seen a transcript or even an outline of the speech, but there were previous reports that went into a little more detail, e.g. also from Reuters, https://www.reuters.com/article/idUSKBN27J0D4:

The outspoken billionaire railed against the Basel Accords, a series of international regulations that require banks to hold a certain amount of capital, as outmoded for the modern era. He also accused Chinese lending institutions of having a “pawnshop” mentality of using collateral instead of advanced credit ratings and watchdogs of not knowing the difference between regulation and supervision.

And on new regulations in draft stage to cover the current gray areas https://www.reuters.com/article/idUSKBN27I1WB:

While it made no mention of Ant, the draft comes as regulators sharpen their focus on banks that heavily use micro-lenders or third-party technology platforms like Ant for underwriting consumer loans, amid fears of rising defaults and deteriorating asset quality in a pandemic-hit economy.

I derived much of my understanding of Ant not from reporting, but rather, from talking to local sources who are more familiar with the matter. I’m on mobile now so won’t expand on this complex topic... However, if you know the Chinese language you can find plenty of criticisms of Ant’s personal credit/loan products (which, for instance, offer unsecured credit and loans to people with absolutely no income and/or collaterals, like college students, and coupled with aggressive marketing from online marketplaces including Alibaba’s Tmall, lead to hopeless debt cycles); probably less about risky business loans.

princekolt• 6 years ago

Indeed. I had the same feeling. The article mentions that the regulation changes were already known.

This is just me speculating, but what if Jack realized the IPO would be a disaster (for that reason or others) and decided that this was the best strategy to halt it without recourse?

unnouinceput• 6 years ago

And if anyone was remotely believing that Chinese Party has nothing to do with their companies, this just hit the last nail on that belief. I'm looking at you Huwaei and your "we do not spy for Chinese Govt." statement from last year.

As a member of an EU country, that went full Huwaei in past years regarding 5G, I'm sad that we just gave to Chinese full control over us, technologically speaking.

hungryhobo3• 6 years ago

How does this prove CCP has anything to do with ant? If that were the case wouldn't they want ant to ipo and reap in the capital?

TaylorAlexander2• 6 years ago

Probably, but they can let it IPO in a few months, after making some adjustments to the structure. They are in no rush.

JumpCrisscross9• 6 years ago

How does this prove CCP has anything to do with ant?

The Ant IPO has been hotly anticipated. This delay will cost many millions. The regulatory changes, billions.

That these were acceptable costs to reining in Ma over nothing more than public criticism speaks miles to the party’s cost-benefit mindset. For tangible gains it implies few hurdles to extreme consequences for noncompliance.

mytailorisrich• 6 years ago

Governments wield huge power over private companies if or when they decide to take action. That's obviously very true in China, but that's also true in the West.

Just look at what happened to Huawei and Tiktok in the US/West, look at how Facebook is careful in order to prevent action against them, etc.

That's especially true in industries that are seen as strategic (telecommunications, energy, finance, etc). Companies know that and spend a lot of efforts on building and maintaining contacts within governments.

ngcc_hk• 6 years ago

It is not. Spending fake news.

It is the last stand of him to fight against the authority that torture him fir 1 year and even take alibaba from him. Do not treat the victim as the killer. He was shouting before his dearth.

yurlungur• 6 years ago

I dunno, reading the article I get some mixed feelings about this. On one hand, it doesn't seem that bad that regulators can rein in even the biggest players and at least judging from the description the move may not be that bad for consumers. What if Ant is indeed taking too much risks and now is on its way to grow to too big to fail? On the other hand, the timing and turn of events look very capricious to say the very least.

eunos• 6 years ago

Do you think it's better for China's regulator to rein them before the IPO (with delaying the said IPO) or after the IPO? if the regulators rein them after the IPO, the stocks gonna crash for sure and people will speculate that the regulators might play insider trading or simply cheat international investors.

afjl• 6 years ago

They should have reined them in long before the IPO date this week, when they were supposed to be doing their due diligence and assessing the risk that ANT's lending practices pose.

The decision to do so after this PR broadside from Jack Ma appears (to some) as a political statement, and not truly policy-based regulation.

geodel3• 6 years ago

turn of events look very capricious to say the very least.

In so many places that's the only way when hotshot businessman's tactics get investigated. Otherwise they wine and dine with top politicians and their brokers. So regulators can't touch them.

robertlagrant• 6 years ago

China’s securities industry watchdog said subsequently that recent regulatory changes could have a “major impact” on Ant’s business structure and profit model

Fabulously successful Chinese businessman criticises China. China government's response: "That's a nice business you got there. Would be a shame if anyfin' were to 'appen to it."

ineedasername3• 6 years ago

China certainly wants massive internationally successful businesses, but Ma's remarks were very poorly timed. Given concerns outside of China about a loose oversight & regulatory process amidst an economic crisis, Ma's remarks played right into those criticisms. Not a smart move with an over-sensitive & censor-happy regime. Which isn't meant to justify China's actions, only to observe that the consequences of Ma's remarks weren't exactly unforeseeable.

lm28469• 6 years ago

That's the difference between China and the US. In the US Capital reigns over politics, in China politics reign over Capital

zby• 6 years ago

I don't know - but it is kind of naive to assume that he did not know what would happen after his speech.

newbie578• 6 years ago

Stuff like this is why China will never be able to achieve its full potential.

I'm not saying they won't become successful, unfortunately it is only a matter of time until they eclipse the U.S. as the world's biggest economy (having 1.3 billion citizens and not having to waste money on R&D wink wink tends to help also), however they are still holding themselves back and not managing to utilize their full potential.

powerapple• 6 years ago

I see this as China's advantage. The government is super flexible. There were 3k fintech p2p lending companies in last few years, because it is a new thing, the government don't know how to regulate it. Rather than waiting for regulation, it allows companies to run, and slowly put out regulation to fix problems. There are 15 fintech p2p lending companies now. The policy does not come out just for Ant, I am sure it has been for a few months at least in preparation. Ma definitely knew this is coming, that's why Ant is rushing to IPO now. In government, there might be people supporting relax regulation on finance industry, and people supporting more restrict regulation. Although I am sure Ant group's business is very profit, I don't really like how they push a credit card culture to young people. I would argue a loan is not something should be done in a few seconds, and that is not something you should be proud of.

Barrin92• 6 years ago

Letting financial markets and lending spiral out of control just for the sake of having a mega IPO on public display to the world is a horrible idea. I actually see this move as a good sign that Chinese governance is still very functional. They're putting the health of the financial system ahead of their image as the new finance superstar, it would have been easy to just let it go through to show off China's financial independence.

Letting unregulated finance run rampart isn't a signal of achieving your full potential. It's a fairly new development maybe from the 80s onward.

redleggedfrog• 6 years ago

Ma, come to the USA! We'd love a guy like you.

thecleaner• 6 years ago

Oh give me a break with this fell to earth nonsense. The IPO isnt cancelled and its not lile Ant Group has somehow become a weak business. Eventually they will get to the IPO stage and I suppose the markets will reward or punish them for theit financials.

jessaustin2• 6 years ago

People don't want to think. It's easier to just slot this into the "WeWork" bucket and ignore all the details.

ineedasername3• 6 years ago

Sure, it's wrong for the PRC to retaliate against criticism. On the other hand, when regulators of an overly-sensitive & censor-happy regime start taking a closer look at you, it's probably best not to poke them in the eye. Again, that doesn't justify things, it's just that the consequence were probably foreseeable.

bogwog• 6 years ago

The day the Chinese Communist Party falls is the day the US's global dominance will actually start to be threatened.

Congeec3• 6 years ago

If a financial institution operates like a bank but creates more risk than a bank, shouldn't it be regulated like a bank?

Jack Ma said banks should ditch the "pawnshop" mindset and switch to a credit-based loan service, because his Ant's micro/small loan service is completely backed by credit rather than something risk-proof properties like a house. Ant not only acts like a bank, but also is the largest credit buerau in China. It provides loan based on the credit score it rates on its customers.

This article also fails to mention the Basel Accords that Jack Ma criticized. After the 2008 financial crisis, Basel III includes regulations on "shadow banks" like Ant in addition to traditional banks. Is it possible for a bank that has only assets of 3B lends out 300B[1]? No, banks are prohibited due to regulations. But, Ant already did. They created an Asset-Backed Security (ABS) via a process called securitization. It is unprecedented that a financial institution with such big financial leverage and a large amount loan going unregulated.

A pawnshop is at least backed by real properties like houses. What back the risk Ant create? Consumers' credit?

If I still cannot make you understand, please google "2008 MBS ABS". You'd be surprised at the similarity of what Ant's been doing and what caused the financial crisis.

I sincerely hope hacker news readers take a look into the underlying financial bubble rather than "Chinese government reaps tech innovator" to which this article tries to mislead you.

[1] https://translate.google.com/translate?hl=en&sl=zh-CN&u=http...

wbc• 6 years ago

Where do you get the 3/300B numbers? Didn't see them from the article. If true, that would be an insane amount of leverage.

Congeec3• 6 years ago

Sorry I don't have an English source but translation https://translate.google.com/translate?hl=en&sl=zh-CN&u=http...

blueblisters• 6 years ago

The real question people are asking is why now? Didn't the regulators have enough time to assess the irregularities earlier? A $30 billion IPO plan couldn't have been made public without the regulators giving at least some in-principle approval, and I'm sure Jack Ma knows how to navigate the bureaucracy/politics in China before he would make such plans public. I don't understand Chinese politics much but this just reeks of vendetta.

After the 2008 financial crisis, Basel III includes regulations on "shadow banks" like Ant in addition to traditional banks. Is it possible for a bank that has only assets of 3B lends out 300B? But, Ant already did. They created an Asset-Backed Security (ABS) via a process called securitization. It is unprecedented that a financial institution with such big financial leverage and a large amount loan going unregulated.

If that's the case, why were they being allowed to continue as a privately-owned lender for so long?

geodel3• 6 years ago

The real question people are asking is why now?

These why now questions unfortunately never have satisfactory answers. Too early: there is no scam/govt is stifling innovation, in the middle: not enough proof, late: why regulators were sleeping till now.

Congeec3• 6 years ago

Maybe some people of power who get involved and want to reap benefits. Maybe the company found in 2013 is too new for the government to catch up. China does not have a long established financial industry like developed countries. State capitalism has just started four decades ago. Maybe Jack Ma knows regulations will come out soon and just made public opinions before regulation rules are revealed to the public.

I do not have any source to back my guesses.

analyst74• 6 years ago

The real question people are asking is why now?

That is a very good question, from public information I can gather around Ant and Ma's career in general, it seems he has strong backings from a wide range of powerful people due to financial relations as well as his reputation -- he is the Elon Musk of China and commands tremendous respect and pride among not just citizens but also top leadership.

In fact, his backing is so strong that China's banking and financial regulators have not been successful at regulating Ant despite other fintech pioneers' blatant failings. However, this time he miscalculated how far he can push and the more conservative voices in the party have finally gained an upper hand.

jessaustin2• 6 years ago

If the situation is how you describe, the most important question would be: who is holding these securities? If it's just some random Chinese savers looking for higher interest, there is not necessarily a problem. Of course, a similar situation was a problem in the USA context in the previous decade, but that was due to the particular circumstances. Those who had extracted rents by pretending to "insure" MBSs had used a portion of those rents to pwn the USA political structure. When it was clear that MBSs were worthless, they chose to destroy our system of representative government rather than taking bankruptcy. That wouldn't be an option in China, and it certainly wouldn't be an option available to random small Chinese savers.

duxup2• 6 years ago

Yeah I don't know the full Ma / Ant story.

But that pawn shop comment, man if that's really related to the fact that pawn shops exist because something backs the loan ... and if Ant is really as big as folks say it is (I'm talking about my ignorance here, not anything deceptive) and it is could have a huge impact on Chinese banks.... that's a lot to worry about.

I don't pretend to know China's motivations or etc, but I think there may be very real regulatory concerns.

paganel• 6 years ago

I also saw that 3B to 300B leverage mentioned in the FT and I was surprised that it didn’t get picked up by the non-economics-related media, they all insist on “Chinese government bad because it didn’t let China’s most successful entrepreneur do his thing”.

We’re talking about a leverage ratio of 100, that’s a crazy figure, if I’m not mistaken Lehman’s leverage ratio when it folded was of “only” 30.

cfcosta• 6 years ago

I don't think it is a case of the CCP stopping all entrepreneurs, but a case of them choosing which companies succeed and which fails.

xster2• 6 years ago

According to https://youtu.be/HnCBbiCetSg?t=569, the S-1 equivalent filing of the IPO showed Ant itself putting up 1.68% of its own money towards its lendings. That's way more leverage than the 8% mandated in Basel III.

dehrmann• 6 years ago

Either way is a failure for the CCP: it looks bad for letting the offering get this far, or it looks bad to future entrepreneurs for blocking it.

justicezyx6• 6 years ago

Ant IPO debacle shows me that the rich and powerful, in the capitalism sense, are incredibly consistent in their thinking; even the one raised up in a communist totalitarian country.

They simply cannot think from any other perspectives that can reveal their fundamental flaws.

Unlike communism authoritarian, who at least can admit the effectiveness of capitalism in mobilizing the society in economy activity.

sudosysgen8• 6 years ago

Ultimately, I think this is a case of the incentive structure and material reality of those people shaping their worldviews and actions.

This shared environment lead them to a worldview where myopic self-interest is the only thing that matters.

In other words, I think the shared material environment dominates culture and upbringing, and leads to transcultural trends here.

trhway• 6 years ago

If I still cannot make you understand, please google "2008 MBS ABS". You'd be surprised at the similarity of what Ant's been doing and what caused the financial crisis.

blaming financial crisis on ABS/MBS is wrong. Some ABS/MBS may be very risky and it is just fine. The Ant's ABS sound like very risky and it is just fine. An informed investor may as well choose to play with such a risk for a high premium.

The true cause of 2008 was humongous amount of cheaply bought CDS because the underlying MBS were rated AAA which is several orders of magnitude higher then they should have been. It is like a somebody buying for $1 a $1M "life insurance" - basically betting - on a life of a 100 year old person. An insurer selling such insurance (ie. CDS) would quickly go bust like it happened in 2008.

maest2• 6 years ago

assets of 3B lends out 300B

My understanding is that the loans don't go on Ant's books, they just sell them on. In that case, Ant's assets are irrelevant, since they're not the ones taking any risk and, thus, don't have to cover for the losses.

thedudeabides52• 6 years ago

Even if they are just “warehousing” the credit this would be false, as they need to hold some of those assets on balance sheet while they try to sell them.

This balance sheet is indeed what regulators would require them to hold capital/reserves against.

Further, what’s the documentation that they “just sell them on” end if they do, why wouldn’t their balance sheet shrink??

tpmx2• 6 years ago

This post suddenly fell off the front page ~6 hours ago and now reappeared. Moderators manually unflagging it?

yorwba3• 6 years ago

The post got more comments than upvotes, which triggers the flamewar detector. Most likely dang woke up, checked his notifications and decided that it was a false positive.

eznzt3• 6 years ago

Poor dang, always working for us tirelessly. All hail dang.

ineedasername3• 6 years ago

I wonder how much of this is deliberate realpolitik calculation on the part of the PRC: Amidst international concerns about their regulatory & oversight process, Ma gave them an extremely visible opportunity to appear to crack down in a way that increases their regulatory credibility. They don't even need to actually change anything: They can simply let Ma pay lip service to addressing regulator concerns and proceed with the IPO in another 6 months with very little lost except a bit of time. China then reaps the benefits of both another massively successful corporation and the perception of tighter regulation.

A4ET8a8uTh0• 6 years ago

I find the language used by Reuters odd. Can someone explain the odd amount of glee it seems to take at Jack's change of fortune? I am not aware of any inherent bias thus, but I can't tell if Reuters is becoming more clickbaity or there is some actual bias behind it.

vermontdevil• 6 years ago

Learned something about the pawn shop industry in China. Had no idea.

watertom• 6 years ago

It seemed like a giant scam. I think the CCP got cold feet and use Jack's comments to avoid a much bigger embarrassment.

TearsInTheRain• 6 years ago

Im curious if this will have chilling effects on investment in China.

llsf• 6 years ago

Or is it a brilliant move to justify the introduction of Ant in NYSE/NASDAQ ?

It is hard to imagine that Ma did not anticipate the possibility of the regulator reacting to his speech. If he did anticipate, then it becomes part of the plan. If he did not anticipate it, then it would be a mistake.

blackrock2• 6 years ago

News finally started to emerge about Ant after this incident. It turns out, Ant is more of a loan shark, and giving out loans at 15% interest.

However, Ant is operating as a financial company, but without the regulations of a financial company. Meaning that Ant was only keeping 2% of money to back up their loans, and lending out at a 50-to-1 ratio. Whereas financial companies had to keep 30% available.

And there were other news that Ant was merely acting as a finder, and routing the customers to the banks, who took on the financial risk of giving out the loan.

All of it sounds rather risky. Things are good when the good times roll, but what happens when the wheels fall off the car?

Ant’s premise was that they were smart enough to know who were good credit risks, and who wasn’t, by using their AI system to monitor things on your phone, like your battery life, and how quickly you paid your bills.

Things that quite frankly sounds superficial and irrelevant in the greater scheme of things.

The basic question is: What happens when the music stops? Who will be left to pick up the pieces if Ant fails?

SZJX• 6 years ago

From what we can see so far (also reported in this Reuters article), he seems to have made the speech fully knowing the upcoming regulatory changes. It seemed to be his last gambit to try to appeal to whoever is relevant out there (e.g. central government) to stop the regulators from enacting tougher rules, since changing the required funding level for loans from 2% to 30% will no doubt make the originally envisioned IPO valuation completely moot.

It might have been a case where Ant has been planning the IPO for some time already, but in the meantime the regulators became determined to rein in the rampant private loan industry. Even though the older generations were renowned for saving, the young generation is being encouraged to borrow like there's no tomorrow, and the situation is becoming a lot like the US. Shadow banking has been a huge problem in China for a few years already (you can easily Google news reports about it). This is a huge risk that the regulators will understandably want to curb, especially given the uncertainty this year. I think it's a case of Ma knowing of this regulatory change but still wanting to salvage the original valuation of the IPO, just as any capitalist would want to try to do, but failed.

So there might be no point in reading too much into it and dismissing the situation to an essentialist argument "because China/CCP, of course this happened...". Sure, in other countries the regulators might not move so resolutely to halt an IPO. But from what we can see the motive is genuine and out of concerns of the crazily leveraged business model, instead of anything dirty or political.

sizt• 6 years ago

ccp are gangsters and jack ma is a tool

Jack Ma fell to earth and took Ant's mega IPO with him

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