Two years ago, Chinese regulators torpedoed Ant Group Co.’s would-be record initial public offering, sending shock waves across global capital markets. New rules have been slapped on the fintech giant, which has operations ranging from consumer lending to wealth management to online payments. The result is that the once-fertile landscape for web-based financial services has drastically changed as part of a government effort to bring the entire technology sector to heel. Now the big question is whether Ant -- controlled by billionaire Jack Ma, China’s most-famous entrepreneur -- will get another chance at going public.
1. What would need to happen for Ant to go public?
The most important thing it needs is to set up a financial holding company, like a regular bank. Its application to the central bank for such a license is nearing the final stages of approval, people familiar with the matter said in June. Ant then would need a sign-off from the China Securities Regulatory Commission to list in either Shanghai or Hong Kong (the scotched 2020 plan was to list in both cities simultaneously). While not officially part of the process, in reality it also would need blessings from senior Chinese leaders and a wide range of government agencies. That includes the Financial Stability and Development Committee, which is led by President Xi Jinping’s confidante, Vice Premier Liu He. The central bank and finance ministry are part of this group.
Signals have been mixed. Financial regulators have held preliminary discussions on reviving an Ant IPO, according to the people who spoke to Bloomberg News. One of them said the CSRC set up a team to reassess Ant’s plans. On the same day, Reuters reported that China’s central leadership has given an initial nod to restarting Ant’s listing plans in both Shanghai and Hong Kong. The CSRC dampened hopes that anything was imminent when it denied that it was conducting review and research work on Ant’s IPO. However, it added that it supports eligible platform companies going public in China and overseas.
3. What’s Ant been doing?
Chairman Eric Jing said last year that the company would eventually go public, but as of June it said it had no plans to initiate an IPO yet. Ant has been recasting its business to meet the demands of China’s watchdogs, who have pledged to curb the “reckless” push of technology firms into finance. In April 2021, the central bank also told Ant to open up its payments app to competitors and to sever “improper links” that steered users toward more lucrative services such as lending. Ant also set up a consumer finance unit that went into operation last year, with new rules that limit its ability to lend. Consumer loans jointly made with banks -- previously a major engine of growth -- were split from its Jiebei and Huabei brands. Assets under management at its money-market fund Yu’ebao -- once the world’s largest -- dropped 15% from a year earlier to 825 billion yuan ($123 billion) as of March.
While Ant fetched a valuation of $280 billion pre-IPO, based on its stock pricing, the myriad regulations imposed over the past two years mean its now worth a fraction of that, as it’s now more “fin” than “tech.” Expectations of growth and margin are generally lower for banks than technology companies. Fidelity Investments, for instance, slashed its valuation estimate for the firm to about $78 billion last year from $235 billion just before the IPO was abruptly suspended. In June Bloomberg Intelligence analyst Francis Chan estimated that Ant is worth about $64 billion.
5. What would be included in a listed version of Ant?
Ant will probably use the financial holding company to go public. The central bank told Ant last year to fold any financial operation into that entity, which will be regulated more like a bank. Among them are Ant’s payment business Alipay, which in 2020 had 711 million active users, mostly in China, who tap it to buy everything from a quick coffee to property, generating $17 trillion in payments over a year. It also could include Ant’s wealth management, credit scoring and consumer-lending operations. That said, it’s unclear what the final structure will be and if there needs to be even further separation between Ant’s payments operation and other businesses. Ant has been told to build firewalls to cut direct traffic between Alipay and its other services like wealth management, and to return to its roots as a provider of payments services.
5. What does this signal more broadly?
The cancellation of Ant’s IPO kicked off a series of regulatory actions that have changed the playbook for the nation’s tech champions, which had prioritized growth at all costs. Global markets whipsawed in reaction to Xi’s and the party’s evolving stance toward Big Tech in general and especially control over the vast pools of user data held by private sector companies, which they viewed as a potential threat to national security. Some big banks went so far as to call Chinese tech stocks “uninvestable.” Of late, though, the tone from Beijing has shifted. Vice Premier Liu, who is Xi’s most senior economic aide, gave an unusual public show of support for digital platform companies in May.
6. What happened to Jack Ma?
The co-founder of Alibaba Group Holding Ltd., from which Ant was spun, used to be one of China’s most high-profile entrepreneurs. But Ma, 57, has mostly disappeared from public view since giving a speech that criticized regulators on the eve of the scuttled Ant IPO. (He was spotted working on his golf game in early 2021 and later traveled to Europe.) Once the richest man in China, his personal wealth took a major hit during the tech selloff. Still, as of midyear he was worth $37.3 billion, according to the Bloomberg Billionaires Index, making him China’s fourth-richest. Many of his peers have relinquished their formal corporate roles and increased donations to charity to align with Xi’s vision of achieving “common prosperity.”
• More QuickTakes on China’s tech crackdown and what happened to Didi Global Inc., as well as looks back at Jack Ma and Alibaba.
• A Big Take on what’s next for fintech in China.
• Bloomberg Intelligence analyzes what an Ant IPO would mean to China.
• Bloomberg Opinion’s Shuli Ren asks why China is still scrutinizing Ma.
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