What was supposed to be the world's largest initial public stock offering has been halted at the last minute. The Chinese financial company, Ant Group, was set to go public on Thursday. The IPO was expected raise an estimated $37 billion and boost Ant's market value to in excess of $300 billion.
But regulators for the Shanghai Stock Exchange, where Ant was planning to list, abruptly suspended the offering on Tuesday, citing "major issues" with the group that "may fail to meet information disclosure requirements." Hong Kong's bourse, where Ant was planning a dual listing, soon followed in halting the IPO.
The indefinite suspension two days before the scheduled offering follows a regulatory dressing down of the group's chairman and majority owner Jack Ma on Monday, where Ant Group was asked to report on major issues regarding "changes in the financial technology regulatory environment," the Shanghai Stock Exchange said in a statement.
"We will be in close communications with the Shanghai Stock Exchange and other regulatory departments regarding the next steps to listing," Ant Group said in a press release. "And will disclose relevant information in a timely manner."
Shares of Ant's parent company, Alibaba, tumbled more than 9% after news of the suspension was announced. Ant's joint listing in Shanghai and Hong Kong was meant to boost the prestige of China's domestic exchanges and attract more public offerings from global tech firms, for whom the New York Stock Exchange still remains the premier bourse.
Along with Ma, Ant's executive chairman, Eric Jing, and its chief executive, Simon Hu, were "summoned" by four financial regulators, including the state bank, according to a curt statement put out by the regulators on Monday.
The halt of Ant's IPO came after he made disparaging comments about China's regulatory environment and state banks.
"China does not have a systemic financial risk problem. Chinese finance basically does not carry risk; rather, the risk comes from lacking a system," he told those gathered for a finance conference in Shanghai. "China today needs policy experts, not paper pushers." In his comments, Ma also dismissed Chinese banks as "pawnshops" giving loans out to companies "that do not need money. As a result, many good companies have turned into bad companies."
Ant Group, spun off of Chinese tech conglomerate Alibaba and controlled by chairman Jack Ma, has become a formidable financial platform with assets that rival those of the world's largest banks. Its Alipay app is China's largest mobile payment platform, handling an estimated $16 trillion in online payments last year. Its vast pool of user data has allowed it to serve as an efficient matchmaker between smaller businesses and individual investors in need of a loan and traditional lenders. Ant Group also runs one of the world's largest money market funds, drawing on unspent funds users leave in their Alipay payments accounts.
That has led to a complex and sometimes tense relationship with Chinese regulators, who see Ant Group as both a much-needed domestic innovator and rival to state financial institutions.
"Regulators have to be seen to reassert the primacy of the regulators and the need to preserve stability," said Duncan Clark, the chairman of consultancy BDA China about the suspension of Ant's IPO. "It's standard government muscle flexing."