Ant Group IPO: Jack Ma Receives Warning From China Over Ant’s Rapid Expansion | International business news
Ma, Ant’s billionaire co-founder and one of China’s most powerful businessmen, was summoned to a rare joint meeting with the country’s central bank and three other major financial regulators on Monday. While neither party has disclosed details of what was discussed, people familiar with the matter said Ant’s management team had been told the company would be under surveillance. increased and would be subject to capital and leverage restrictions similar to those of banks.
Investors have long understood that Ant would fall under China’s new financial conglomerate regulations, but the meeting could nonetheless temper the frenzy surrounding the biggest stock market debut in history. Ant is expected to start trading on Thursday after raising at least $ 34.5 billion in an IPO that drew more than $ 3 trillion in orders from retail investors in Shanghai and Hong Kong.
“Regulatory risks are the biggest risk factor for Ant Group,” said Kevin Kwek, analyst at Sanford C Bernstein, in a note. “We believe that the news will only be progressively negative for the listing and believe that most investors will remain optimistic about Ant’s positive long-term outlook. However, investors could revise their growth assumptions given the clear signs of regulatory intervention. ”
Ant chairman Eric Jing and chief executive Simon Hu joined Ma at the meeting, which included the banking supervisory body, the China Securities Regulatory Commission and the State Foreign Exchange Administration, according to a statement. of the CSRC on Weibo. The statement described it as a “yuetan” or regulatory warning.
Ant said in a statement that he would “implement the advice of the meeting in depth” and follow guidelines including stable innovation, adoption of supervision and service to the real economy.
The central bank, banking regulator and CSRC did not respond to requests for further comment.
Ant has been hit by a wave of new rules in recent months as China tightens its control over online lenders and companies that operate in multiple financial industries. The measures included capital and licensing requirements, a cap on lending rates, and limits on Ant’s use of asset-backed securities to fund quick consumer loans. On Monday, the banking regulator released draft rules that would require Ant and other online lending platform operators to fund a larger share of the loans they offer with banks.
The Hangzhou-based company, a 2010 offshoot of the e-commerce giant Alibaba Group Holding Ltd, dominates the payments market in China through the Alipay app. It also manages the giant Yu’ebao money market fund and two of the country’s largest consumer credit platforms. Other activities include a credit rating unit and an insurance market.
Ant has come under censorship in Chinese state media in recent days after Ma criticized local and global regulators for stifling innovation and not paying enough attention to development and opportunities for young people. At a conference in Shanghai late last month, he compared the Basel Accords, which set capital requirements for banks, to a club for the elderly.
“A good innovation is not afraid of regulation, but is afraid of outdated regulation,” said Ma. “You should not use the way of managing a station to regulate an airport, nor regulate the future with yesterday’s method.
A weekend meeting of the Financial Stability and Development Committee, chaired by Vice Premier Liu He, highlighted the need to regulate fintech companies.
Opinion pieces in official journals – including those run by the central bank and the banking watchdog – criticized Ant for deviating from its core payments business and called for big tech to trick users in error so that they consume beyond their means.
Guo Wuping, head of consumer protection at the China Banking and Insurance Regulatory Commission, wrote in a comment on Monday that Ant Huabei’s consumer loan service was similar to a credit card but with fees. higher. Fintechs are using their market power to set exorbitant fees in partnerships with banks, which provide most of the funds needed, he said.
Ant, which has more than 700 million monthly Alipay users, has made partnering with traditional banks a central part of its strategy. Its lending platforms extended loans to around 500 million people in the 12 months to June, charging annualized rates on small loans of around 15%.
Billionaire Jack Ma, chairman of Alibaba Group Holding Ltd, looks on during a press conference in Hong Kong, China on Tuesday, November 1, 2016. Zhejiang Ant Small & Micro Financial Services Group Co, Alibaba’s financial subsidiary, relies on partners outside of China to bring its model of online financing and local services to emerging Asian markets.
New measures proposed Monday by the banking regulator for online lenders included imposing a cap on the amount of loans to be offered to individual borrowers as well as on leverage.
The draft rules could be a blow to Ant, as they require platform operators to provide at least 30% of loan funding. About 2% of the 1.7 trillion yuan ($ 254 billion) in loans facilitated by Ant in June were currently on its balance sheet, the company said in its prospectus.
Ant declined to comment on the proposed measures.
The impact on the market of a new regulatory review on Ant will become clearer when the stock debuts on Thursday, but for now, investors appear to be taking the news eagerly. Alibaba, which owns about a third of Ant, rose 2% in New York on Monday. Ant maintained its early gains in the so-called Hong Kong gray market, where the shares would trade at a 50% premium to the HK $ 80 listing price on Monday.
The proceeds from the IPO could help Ant meet its growing capital needs, said Francis Chan, Hong Kong-based analyst at Bloomberg Intelligence.