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Alibaba shares retraced after Ant said that it had no interest in an IPO. The planned IPO would have been the biggest in history.
Alibaba’s financial affiliate Ant Group initially saw its IPO plans scrapped back in November 2020 owing to regulator concerns. The planned dual listing in Hong Kong and Shanghai would have been the biggest IPO in history at $37 billion. However, regulators instructed Ant Group to revamp its business structure to comply with Beijing-enforced rules. One of these rules was the compulsory setup of a financial holding company. Many expected that doing this would impact Ant’s profitability and valuation.
Ant Group has disclosed that there are currently no plans to revive a public listing. The China Securities Regulatory Commission also stated that it had not conducted any groundwork probe into Ant’s potential IPO. However, previous reports stated that Chinese financial regulators were looking to resuscitate Ant’s public listing amid easing tech crackdowns. Furthermore, reports also suggested that Beijing had cleared the path for a potential IPO by the Jack Ma-controlled Alibaba affiliate. At the time, Dickie Wong, executive director of Kingston Securities in Hong Kong, said about Ant’s potential IPO:
“The Chinese government needs something to encourage economic growth and there has been an easing in some regulatory policies that had been put in place for the tech sector. The size of Ant and the IPO will have to be smaller than what was planned in 2020 because the market conditions have changed and cannot be compared to now.”
To these speculations, Ant Group moved to squash by issuing a statement through a company spokesperson, which read that “under the guidance of regulators, we are focused on steadily moving forward with our rectification work and do not have any plan to initiate an IPO.”
Alibaba Affiliate 2020 IPO Termination Foreshadowed Broader Chinese Tech Crackdown
The initial rug pull of Ant Group’s planned November 2020 IPO began a heavy tech crackdown in China. Lasting about 16 months, the stringent sweeping regulatory tightening wiped off billions of dollars from the country’s localized tech powerhouses. Shares affected following the terminated IPO were Alibaba, Tencent (HKG: 0700), NetEase (NASDAQ: NTES), Baidu (NASDAQ: BIDU) and JD.Com (NASDAQ: JD).
However, the crackdown appears to be tapering off although it may take a while before the unwinding of enmeshed policies catches up. As Linghao Bao, a tech analyst at Trivium China, explained in a media session:
“I think the big tech companies will have a grace period for maybe the next six months…However, this is a really not a U-turn on the tech crackdown, the long-term outlook hasn’t changed yet. Because Beijing has already come to the conclusion that it is a bad idea to let big tech companies to run wild because it creates unfair market competition.”
Another evidence of the easing crackdown is a wave of recent reports that Chinese regulators were close to ending their probe of ride-hailing giant DiDi Global Inc (NYSE: DIDI). Furthermore, there was a recent upswing in Chinese tech stocks following substantial gaming approvals in the county.