The initial public offering (IPO) of Ant Group, the world’s highest-valued financial technology company, was suspended this week by the Chinese government.
Among other holdings the company runs digital payments platform Alipay.
The $37 billion listing of the Hangzhou-based FinTech, which is backed and one-third owned by Jack Ma’s Alibaba group, was poised to break records for a market debut.
Shares were due to start trading in Shanghai and Hong Kong on 5 November, but the listing was stopped late on 3 November, triggering a near 10 percent fall in the value of Alibaba shares.
A statement from Beijing explained that the IPO was suspended for regulatory reasons, to
“better maintain the stability of the capital markets” and to “protect investors’ interests”.
However, it is widely believed that the move constitutes a public display of dominance by the government over Ma, who is China’s richest man.
Ma has openly challenged financial regulators in recent speeches, revealing the tensions within China between the communist government and the more open, market-led culture that it has allowed to flourish in recent years.
The FT quoted a state-run-bank executive saying,
“The logic for Beijing is: ‘If I don’t understand and can’t control you, I won’t let you grow’.”
That said, concerns have been expressed within China that FinTech startups threaten the stability of the traditional banking system, as they tend to have lower capital and collateral requirements.
Similar claims have been made in the West in recent years by both established and national banks about a range of new financial technologies.
Another issue for China’s government may be the amount of user data that the Ant Group holds.
It is unlikely that the IPO will be indefinitely postponed, but the company may return to find the markets more tightly regulated, which may make investors nervous.
- In related news, the coronavirus pandemic has spurred authorities worldwide to increase the pace of FinTech regulation, according to joint research from the World Bank and the Cambridge Centre for Alternative Finance.
A report published this week found that almost 75 percent of the 118 authorities surveyed had either introduced or speeded up new digital infrastructure initiatives, while 58 percent had focused on supporting new regulatory or supervisory technologies (RegTech and SupTech).