Ant’s record US$34bn IPO crumbles after China rewrites lending rules

7 min read

Ant Group has pulled the plug on the world’s largest IPO less than 48 hours before its shares were due to begin trading, in a dramatic move prompted by China's introduction of new online lending rules.

In an unexpected twist, the Shanghai Stock Exchange announced tonight it had suspended Ant's A-share IPO on its Star board, citing recent discussions between Chinese regulators and Ant’s top executives. The SSE said Ant reported "significant changes" in the fintech regulatory environment that might leave it in breach of the bourse's listing qualifications or disclosure requirements.

The stock exchange said it had taken into account the Star board’s regulations and communications with Ant’s sponsors in its decision to halt Ant’s A-share listing. The announcement did not indicate how long the suspension would last.

Minutes later, in an announcement on the Stock Exchange of Hong Kong, Ant said the concurrent proposed H-share listing on the main board of the SEHK would also be suspended as a result.

Alibaba Group, which holds a 33% stake in Ant, fell 9.2% early in New York trading.

The last-minute regulatory intervention leaves Ant with little option but to offer Hong Kong and Shanghai investors a refund before its next move.

Ant, the fintech affiliate of Chinese e-commerce giant Alibaba, priced a US$34.4bn Hong Kong and Shanghai Star listing last week to an overwhelming response from Chinese and international investors.

The first sign of trouble, however, came on Monday, when the China Securities Regulatory Commission said on its website that Ant's top brass had been summoned to a meeting with a group of senior regulators.

The CSRC, People’s Bank of China, China Banking and Insurance Regulatory Commission and State Administration of Foreign Exchange held regulatory talks with Ant founder Jack Ma, executive chairman Eric Jing and chief executive Simon Hu, according to the CSRC statement.

The statement did not give details of the talks, but the timing coincided with moves to tighten regulatory control of China's online consumer finance industry, where Ant is a leading player.


China’s central bank and the CBIRC published draft rules on Monday for online micro-lending, which could cast a cloud over Ant’s fast-growing business.

The draft rules set a Rmb5bn (US$748m) registered capital threshold for micro-lenders that offer loans online across different regions and Rmb1bn for those that offer loans online in a particular region.

What could hit Ant the hardest is a proposed rule that requires online micro-lenders to fund at least 30% of each loan from their own resources, while the rest can come from financial partners such as banks and trust companies.

According to Ant’s prospectus, as of June 30, about 98% of the consumer and small and mid-size business credit balances enabled through its platform as of June 30 were underwritten by its partner financial institutions or securitised.

Ant generates technology service fees from partner financial institutions that are based on the credit balance originated through its platform, and has partnered with about 100 banks, as well as trust companies.

“Our approach is not to use our own balance sheet or provide guarantees,” it said in the IPO prospectus.

The so called “CreditTech” business was Ant’s biggest revenue generator in the first half of 2020, accounting for 39.4% of revenues, up from 24.8% in 2017. Ant’s digital payment and merchant services contributed 35.9% of revenues in the first half of 2020.

Under the proposed new rules, Ant would have to boost its capital significantly to support the growth of its highly profitable online micro-lending business. The draft also includes requirements for corporate governance, shareholding disclosure and consumer protection.

Also on Monday, Guo Wuping, head of consumer protection at the CBIRC, named several consumer loan companies including Ant units Huabei and Jiebei in a commentary in the 21st Century Business Herald arguing that fintech loan companies effectively perform the functions of banks and should therefore face similar levels of scrutiny.

Guo also highlighted that Huabei has similarities to banks’ credit card businesses but charges consumers a much higher management fee.

Guo said regulators should investigate whether the leading fintech players have infringed consumers’ rights to choose and enjoy fair terms as a result of their monopoly status.


The reports of greater regulatory scrutiny did little to deter investors on Tuesday, with Ant’s H-shares quoted in the grey market at around HK$120, 50% above the HK$80 IPO price.

Ant is already valued at around US$312bn at the IPO price, more than China’s biggest lender ICBC and more than the biggest US banks. The sky-high valuation is mainly supported by its rapid growth.

A research report from joint global co-ordinator Credit Suisse believes digital finance technology services will be the major driver of Ant’s future revenues. It forecasts a 141% year-on-year jump in Ant’s 2020 full-year net profit to Rmb43.3bn (US$6.5bn), and expects its net profit to grow another 30% to Rmb56bn in 2021 and 34% to Rmb75bn in 2022.

Ant's Hong Kong and Shanghai listing attracted subscriptions of US$3trn from retail investors across the two markets.

More than 1.5 million Hong Kong retail investors flocked to the Hong Kong leg with HK$1.3trn (US$168bn) of subscriptions, making the float the most popular in the city's history. The retail tranche was 389 times covered.

Ant sold 1.67bn H-shares in Hong Kong at HK$80 per share to raise HK$133.6bn for the largest listing in the city since insurance giant AIA’s US$20.5bn IPO in 2010.

The institutional books were heavily oversubscribed with more than 1,800 investors participating.

Ant’s Rmb114.9bn Shanghai Star listing, the largest ever A-share IPO, drew a similarly strong response. It sold 1.67bn A-shares at Rmb68.80 each, with about 5.15m retail investors joining the deal. The retail tranche was 872x oversubscribed, attracting about Rmb19trn (US$2.8trn) of subscriptions.

CICC and China Securities are sponsoring the Shanghai Star listing, and are bookrunners with Citic Securities, Huatai United Securities, Shenwan Hongyuan Financing Services and BOC International (China). Haitong Securities is the financial adviser of the deal.

CICC, Citigroup, JP Morgan and Morgan Stanley are sponsors for Ant’s Hong Kong IPO. The four banks are global coordinators, and bookrunners with Credit Suisse and CCB International.


  • 03 Nov 2020 13:45:29 GMT - Ant Group H-share listing on main board of the Stock Exchange of Hong Kong shall also be suspended – Ant Group
  • 03 Nov 2020 13:29:03 GMT - Shanghai Stock Exchange suspends Ant Group's A-share IPO – official announcement