What it would take for Jack Ma’s Ant to restart an IPO

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Two years ago, Chinese regulators torpedoed Ant Group Co.’s record initial public offering, sending shockwaves through global financial markets. New rules have been imposed on the fintech giant, which does business ranging from consumer lending to wealth management to online payments. The result is that the once fertile landscape for web-based financial services has changed dramatically as part of a government effort to bring the entire technology sector into line. Now the big question is whether Ant – controlled by billionaire Jack Ma, China’s most famous entrepreneur – will get another shot at going public.

1. What would have to happen for Ant to go public?

The most important thing it needs is to set up a financial holding company, like a regular bank. Its application to the central bank for such a license is nearing the final stages of approval, people familiar with the matter said in June. Ant would then need approval from the China Securities Regulatory Commission to list in either Shanghai or Hong Kong (the taped plan for 2020 was to list in both cities simultaneously). Although he is not officially part of the process, in reality he would also need the blessing of China’s top leadership and a wide range of government agencies. This includes the Financial Stability and Development Committee, which is headed by President Xi Jinping’s confidant, Vice Premier Liu He. The central bank and the Ministry of Finance are part of this group.

2. What are regulators saying?

The signals have been mixed. Financial regulators have held preliminary talks about reviving an Ant IPO, according to people who spoke to Bloomberg News. One said CSRC had set up a team to reassess Ant’s plans. On the same day, Reuters reported that China’s central management had given the first nod to restarting Ant listing plans in Shanghai and Hong Kong. The CSRC dampened hopes that anything was imminent when it denied it was conducting review and research work on Ant’s IPO. However, he added that he supports the IPO of eligible platform companies in China and overseas.

3. What does Ant do?

Chairman Eric Jing said last year that the company would eventually go public, but in June he said he had no plans to launch an IPO yet. Ant has revamped its business to meet the demands of Chinese watchdogs, who have pledged to curb the “reckless” push by tech companies into finance. In April 2021, the central bank also asked Ant to open up its payments app to competitors and sever “inappropriate links” that directed users to more lucrative services such as lending. Ant has also set up a consumer credit unit which went live last year, with new rules that limit its ability to lend. Joint consumer lending with banks – previously a major driver of growth – has been spun off from its Jiebei and Huabei brands. Assets under management at its Yu’ebao money fund – once the largest in the world – fell 15% from a year earlier to 825 billion yuan ($123 billion) in March.

While Ant hit a pre-IPO valuation of $280 billion, based on its stock price, the myriad regulations imposed over the past two years mean it’s now worth a fraction of that, because it is now more “thin” than “tech”. Growth and margin expectations are generally lower for banks than for technology companies. Fidelity Investments, for example, cut its valuation estimate for the company to around $78 billion last year from $235 billion just before the abrupt IPO halt. In June, Bloomberg Intelligence analyst Francis Chan estimated Ant to be worth around $64 billion.

5. What would be included in a listed version of Ant?

Ant will likely use the financial holding company to go public. Last year, the central bank asked Ant to consolidate all financial operations into this entity, which will be regulated more like a bank. Among them is Ant’s payment business Alipay, which in 2020 had 711 million active users, mostly in China, who use it to buy everything from a quick coffee to a property, generating 17 trillion. dollars in payments over a year. It could also include Ant’s wealth management, credit scoring and consumer lending operations. That said, it’s unclear what the final structure will be and whether there should be even more separation between Ant’s payment operations and other businesses. Ant was ordered to build firewalls to cut off direct traffic between Alipay and its other services like wealth management, and return to its roots as a payment service provider.

5. What does it signal more broadly?

The cancellation of Ant’s IPO kicked off a series of regulatory actions that changed the playbook for the country’s tech champions, who had prioritized growth at all costs . Global markets have collapsed in response to Xi and the party’s shifting stance towards Big Tech in general and in particular the control of the vast pools of user data held by private sector companies, which they considered a potential threat to national security. Some major banks have gone so far as to label Chinese tech stocks as “non-investable.” Lately, however, Beijing’s tone has changed. Vice Premier Liu, who is Xi’s top economic aide, gave an unusual public show of support for digital platform companies in May.

6. What happened to Jack Ma?

The co-founder of Alibaba Group Holding Ltd., from which Ant emerged, was one of China’s most prominent entrepreneurs. But Ma, 57, has mostly disappeared from public view since giving a speech criticizing regulators on the eve of Ant’s scuttled IPO. (He was spotted working on his golf game in early 2021 and later traveled to Europe.) Once China’s richest man, his personal wealth took a hit when he sold technology. Yet by mid-year he was worth $37.3 billion, according to the Bloomberg Billionaires Index, making him the fourth richest in China. Many of his peers have relinquished their official roles in the company and increased their charitable donations to align with Xi’s vision of achieving “common prosperity”.

• More QuickTakes on China’s tech crackdown and what happened to Didi Global Inc., as well as Jack Ma and Alibaba.

• A great insight into the future of fintech in China.

• Bloomberg Intelligence analyzes what an Ant IPO would mean for China.

• Bloomberg Opinion’s Shuli Ren asks why China is still scrutinizing Ma.

More stories like this are available at bloomberg.com

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