Business Essentials for Professionals


After The Crackdown Subsides, Beijing Gives The Green Light To Restart The Ant IPO

After The Crackdown Subsides, Beijing Gives The Green Light To Restart The Ant IPO
China's top authority has tentatively approved billionaire Jack Ma's Ant Group's initial public offering (IPO), according to two sources with knowledge of the situation, in the clearest hint yet that Beijing is loosening its grip on the internet sector.
Ant, a subsidiary of Chinese e-commerce juggernaut Alibaba Group Holding Ltd (9988.HK), plans to file a preliminary prospectus for the share offering in Shanghai and Hong Kong as soon as next month, according to sources who declined to be identified owing to the delicacy of the topic.
According to one of the individuals, the fintech behemoth will have to wait for direction from the China Securities Regulatory Commission (CSRC) on the particular timing of the prospectus filing.
Ant claimed in a publicly publicised statement that there were no plans to relaunch its IPO, but did not elaborate. It did not respond to a request from Reuters for comment on whether it had received approval from Beijing.
The company's stock market IPO was pushed back to November 2020 at the request of Beijing. At the time, it was expected to be valued around $315 billion and raise $37 billion, setting a global record.
"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," Ant said on its WeChat account late on Thursday.
The CSRC and China's State Council Information Office, which handles media inquiries for central leaders, did not respond to Reuters' request for comment.
According to a separate source with firsthand knowledge of the situation, Ant wants to keep the IPO revival plans under wraps until an official announcement, after attracting regulatory scrutiny in its initial effort back in 2020 with the waves the offering caused as the world's largest ever equity float.
After giving a speech in Shanghai in October 2020 criticising financial watchdogs of suppressing innovation, Chinese authorities cancelled the IPO and cracked down on Ma's economic empire.
The derailment of the IPO marked the beginning of a regulatory campaign to rein in China's massive indigenous technology sector, which spread to other areas such as real estate and private education, wiping billions off market capitalisations and causing layoffs at some enterprises.
With its economy slowing in a politically sensitive year in which Xi Jinping is expected to secure an unprecedented third term as party leader, Beijing is looking to loosen its grip on private businesses, including tech behemoths, in order to meet a 5.5 per cent growth target, which economists say will be difficult to meet given COVID-19 lockdowns. 
"They are rolling back on their crackdown to counterbalance the lockdown they've had. Any data out of China lately has been dreadful because of lockdowns and the last thing they want to do is compound that issue. In the next three to six months we are likely to see China's crackdown unwound," said David Madden, market analyst at Equiti Capital in London.
A resurrected IPO may also serve as a sort of redemption for Ma, who has kept a low public profile since Beijing intervened.
Last month, Chinese Vice-Premier Liu He told IT leaders that the government backed the sector's development and would support enterprises seeking listings both at home and overseas.
According to Reuters, China's ride-hailing company Didi Global, which has been under a cybersecurity investigation since last year, is in advanced talks to buy a third of a state-backed electric-vehicle maker.
The news of the talks comes as the Wall Street Journal reported on Monday that Chinese regulators are nearing the end of their probes into Didi, which might give investors more confidence for the company's comeback.
Bloomberg news reported earlier on Thursday that Chinese financial regulators had begun preliminary discussions about reviving Ant's stock market debut, but provided no timescale. Bloomberg reported that the top securities regulator had formed a team to review the share sale plans.
In a later statement, the regulator stated that it had not performed any review or research regarding an Ant IPO.
Alibaba's U.S.-listed shares, which control approximately one-third of Ant, were down 7 per cent after jumping as much as 7 per cent in pre-market trade on the Bloomberg report.
According to a separate source, Warburg Pincus, a major investor in Ant's 2018 private fundraising, reduced its value of Ant to around $180 billion at the end of March from $221 billion the previous year.
Ant has been directed by regulators to restructure as a financial rather than a technology corporation, and sources and analysts have stated that the financial sector normally bears lower valuations.
"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," said Dickie Wong, executive director of Kingston Securities in Hong Kong.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc