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Ant Group receives a regulatory summons to halt its IPO that was scheduled for a dual listing in Hong Kong and Shanghai. The Chinese regulators have asked the Alibaba-backed company for additional disclosures.
On Tuesday, November 3, the much-awaited and record-setting Ant Group IPO faced suspension in Hong Kong and Shanghai. The two big indices made the announcement as Alibaba Group Holding Ltd (HKG: 9988) shares tanked 7% in Asia trade on Wednesday.
The suspension of IPO for the Alibaba-backed financial giant comes a day after Chinese authorities warned the company on restrictions of capital and leverage. Later on Tuesday, the Chinese regulator – China Securities Regulatory Commission – issued summons to Ant Group controller Jack Ma, CEO Simon Hu and executive chairman Eric Jing.
The Shanghai Stock Exchange released a statement explaining the reason behind the suspension. The regulator noted that Ant has reported “significant issues such as the changes in financial technology regulatory environment”. It also added that “These issues may result in your company not meeting the conditions for listing or meeting the information disclosure requirements.”
Thus, the Shanghai Stock Exchange decided to suspend the company’s listing on its STAR Market. Ant Group later confirmed that even the Hong Kong Stock Exchange has suspended the listing.
With a dual listing, Ant Group was preparing to raise $34.5 billion with the biggest IPO in history. However, with the recent developments, Ant Group has said that they will continue to work with the regulators to sort this matter out.
Ant Group Issues Apology
The latest pull-back of IPO has been a big turndown for the investors who have been waiting for a bumper listing. Ant Group has issued apology for all the recent developments. Speaking to CNBC, an AntGroup spokesperson said:
“Ant Group sincerely apologizes to you for any inconvenience caused by this development. We will properly handle the follow-up matters in accordance with applicable regulations of the two stock exchanges. We will overcome the challenges and live up to the trust on the principles of: stable innovation; embrace of regulation; service to the real economy; and win-win cooperation.”
Last month, Jack Ma issued a few comments that were critical of China’s financial regulator. He also compared the existing financial system with the Industrial Age. He desperately urged for the revamp of the financial system that supports more small businesses and young people. Analysts say that Ma wants regulator to treat Ant as a technology company instead of a strongly regulated financial firm.
Sam Radwan, CEO of management consultancy Enhance International, notes that Ma’s comments could have likely made the regulators suspicious. Analysts also noted that Ant Group’s online lending business is likely to face bigger scrutiny from the Chinese regulators. Speaking to Reuters, Francis Lun, CEO of GEO Securities, said:
“The Communist Party has shown the tycoons who’s boss. Jack Ma might be the richest man in the world but that doesn’t mean a thing. This has gone from the deal of the century to the shock of the century”.
Ant Group has assured that it will work with the regulators and the two exchanges and disclose additional information if required.