For a few minutes on Thursday, markets thought Chinese officials were leaning towards reviving Ant Group’s IPO. If they are, they’re not ready to tell anyone about it just yet.
A team at China’s securities regulator is evaluating the company’s listing plan, the ubiquitous people familiar with the matter said. Additionally, Ant is on the verge of winning a financial holding company license which would bring Jack Ma’s fintech powerhouse under the purview of banking regulators, and could clear the way for a public listing. Sources who spoke to Bloomberg for the story were unable to provide a timetable, but said the licensing process was “nearing the final stages.”
Just two hours after the story was plastered on Bloomberg’s front page, the CSRC said it’s conducting no such review and no such research. Beijing does, however, “support eligible platform companies to list overseas.” It wasn’t immediately clear whether Hong Kong counts as “overseas,” but it’s difficult to imagine Ant pulling off a New York listing in the current environment.
Beijing’s decision to ice Ant’s planned dual listing in November of 2020 marked the onset of Xi’s crackdown on mega-cap Chinese tech, a sweeping effort that morphed into a society-wide overhaul under the “common prosperity” banner. The listing, originally planned for Shanghai and Hong Kong, would’ve been the largest ever (figure below).
I call that chart “the cost of disobedience.” Ant’s plans were upended by authorities just days after Ma critiqued global regulators.
The flamboyant billionaire was reportedly warned by at least two people close to him to “soften” the tone of a now infamous October 2020 address in Shanghai, where China’s most recognizable tech tycoon chided the country’s regulatory apparatus for stifling growth and accused the banking sector of adopting a “pawnshop” mentality. Beijing chafed at Ma’s remarks, which were viewed not as constructive criticism, but as insubordination. Two weeks later, Ant’s IPO was dead. The last minute intervention stunned investment bankers and brokers.
Ant was given a “rectification road map” which included a mandate to establish a financial holding company for its wealth management business and “ensure sufficient capital.” The firm did both. Ant also put up a series of Chinese walls (sorry) across its platforms. As Bloomberg noted Thursday, the ecosystem used to direct traffic from Ma’s payment app, Alipay, to Ant’s services offerings including wealth management. In December of 2020, the PBoC accused Ant of engaging in “illegal regulatory arbitrage.” At one point, Ant boasted the world’s largest money market fund.
The demise of Ant’s original IPO plans and the subsequent scrutiny of Ma’s empire exacted a massive toll. Alibaba’s shares, notwithstanding this week’s gains, remain down more than 60% from where they traded before Ma’s big “mistake” (figure below).
In the ashes of a $2 trillion rout across shares of China’s largest tech companies, some see a historic opportunity. Others still see a falling knife. If Ant’s IPO were to be revived, it’d be a massive boon to the bull case.
Earlier this week, the Wall Street Journal said Beijing was set to lift a ban on ride-hailing giant Didi, the poster child for US listings gone wrong, and a microcosm of a yearsold spat between Washington and Beijing over accounting transparency.
Read more: China’s $2 Trillion Tech Wipeout Seen Over As Didi Probe Ends
It was notable that the CSRC was so quick to issue a statement rebutting Bloomberg’s reporting. Typically, media outlets are unable to reach Chinese regulators (or official departments of any kind) outside of the business day.
The Didi news sent Chinese tech shares sharply higher this week and prompted a chorus of “worst is over” calls. Minutes after releasing the Ant story on Thursday, Bloomberg ran a compendium of quotes from analysts responding to the “news.” The title of that article: “‘Worst Over’ Call for China Tech Booms on Ant IPO Revival News.”
“News.” With plenty of scare quotes.
