Why Jack Ma's Ant Group IPO was Suspended by Authorities
On Nov.3, the Shanghai Stock Exchange in China published an announcement titled, "Decision on postponing the listing of Ant Technology Group Co., Ltd. on the Sci-Tech innovation board." The Ant Group was expected to be listed on Nov. 5, 2020.
The authority explains the suspension for two reasons. Ant Group's actual controller, chairman, and general manager were jointly conducted regulatory interviews (criticism) by regulators.
Ant group's reported changes in the regulatory environment of financial technology and other major issues may cause the Ant Group to fail to meet the issuance and listing conditions or information disclosure requirements. Therefore, the Shanghai Stock Exchange has decided to suspend Ant Group's listing.
Financial Stability and Bubble concerns
Ant Group has been in the headlines these days.
Many experts remain pessimistic about the longer-term economic outlook. Chinese Vice President Wang Qishan had the same views. He said on Oct. 23, "The world economy is in deep recession, and economic globalization is encountering countercurrents, unilateralism, and protectionism."
The Ant Group IPO is a blowout for original issue shareholders. Ant Group will raise $34.5 billion and would be the largest IPO ever in history. Ant Group has locked over $3 trillion for the subscription. At the close of last Friday, the market cap of the Shanghai Stock Exchange is 41.7 trillion RMB (around $6.24 trillion). The trading volume is 329 billion (around $49.2 billion).
The IPO would have made China's richest man Jack Ma even richer. The IPO may also make the former chairman and CEO Peng Lei the richest Chinese woman with a wealth of 207.7 billion RMB ($31.1 billion) in form of stock. The incentives for Ant’s employees will be above 137.7 billion, averaging over 8 million per employee.
Surprisingly, the Ant Group's P/E ratio is near 154. Many have worried about Ant Group's IPO may be one of the largest bubbles as well.
Jack Ma Criticizing Financial Regulations
Jack Ma's words may have annoyed financial regulators. At the "Second Bund Financial Summit" organized by the China Financial Forty Forum (CF40), Jack Ma said that "digital currency could redefine money." Be further added:
Basel Accords is more like a club for the elderly. What it wants to solve is the problem of the aging financial system that has been in operation for decades, and the problem of system complexity. But China’s problem is just the opposite. China has no financial systemic risk but has a risk of lacking the financial ecosystem.
These words may make regulators further unhappy. Basel Accords is actually a regulation and best practice on managing credit in banks and other financial institutions. Credit and credit management are cores of modern finance. Credit is the extension of power. For central banks, they have unlimited credit and the credit is the power of money issuance and absolute power in monetary policies. For commercial banks, credit is the privilege that they can create much extra credit money in the market. The commercial banks only need to reserve a small portion of the money they are lending. The reserve is the basis for risk management in credit-based financial services.
Jack Ma's words have sparked debates on the internet and incurred lots of criticism from regulators, industry leaders, and the general public.
The Ant group has had privileges less low reserve. But Jack Ma asks for more. In his eyes, Ant Group doesn't need to reserve money and it should lend money without limitation. And he claims that Ant Group can manage credit risk and reduce bad debts by a combination of blockchain, AI, IoT, big data, and other technologies. Technical speaking, it is a financial innovation driven by technologies. It can be seen as a challenge to current financial regulations as well.
However, the other factors of the suspension of Ant Group IPO remain unknown. New technologies, especially blockchain and Bitcoin, have been reshaping the whole monetary and financial industry and has brought chaos and scams as well.
The Hong Kong stock exchange (HKEX) has since suspended the Ant Group's listing as well.
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