In November 2020, fintech Ant Group was going for its biggest IPO ever, floating $34 billion worth of stock at a valuation above $313 billion on the Shanghai and Hong Kong exchanges. That equates to a valuation of 120-130 annual profits - a huge number considering Ant Group is essentially just part of Jack Ma's empire and a subsidiary of Alibaba.
However, the offering had to be cancelled after the Chinese authorities spoke out against it. It was a big disappointment for investors who had been eagerly awaiting this issuer on the public markets - the volume of orders reached $3 trillion.
The annual volume of payments passing through the system is almost $20 trillion, which is comparable to the U.S. GDP. In addition to the payment system, the group includes the largest money market fund, Tianhong Yu'e Bao, with 588 million users, as well as the Xianghubao mutual health insurance platform with 91 million users.
The cancellation of the IPO was the result of several trends taking place in China. First, it is the regulation of the market of IT giants, including Baidu and Tencent. The Chinese authorities followed in the footsteps of their U.S. counterparts with a delay of 3 to 4 years. Such large corporations controlling finance, content, users' personal data, and influencing medical insurance have enormous social power in the most populous country in the world. And this is where Jack Ma is rumored to have clashed with Deputy Prime Minister Lou Hee, who oversees economic and financial policy.
At a conference in Shanghai last October, he criticized the regulator's policies and called them an "old boys' club. Obviously, the government decided to show its superiority over the billionaire. The second reason for the cancellation of the IPO is the confrontation with the US.
Alipay is the main asset within the Ant Group. The app allows you to pay other people, keep money, make investments, buy insurance, get financing, credit cards. Parents can approve their children's spending in the app, anyone can pay for purchases by QR code - the most popular method of payment in China.
It is essentially an all-in-one financial app that is used by all of China. At the same time Alipay works in most countries of Asia, Russia, in some European countries and in North America. In most destinations that are popular among Chinese tourists.
The claims of regulators against Ant Group were related to the monopoly position of the company. Under these conditions, the company must meet the capital requirements of traditional financial institutions and Alibaba must cut ties with Alipay. According to Bloomberg, a planned restructuring under which the holding company would be subject to similar capital requirements for all banks in China has been agreed to.
The company and Jack Ma are still looking to go public. However, because of the conflict with the government, the company's valuations have dropped significantly. According to Reuters, the investment community now expects a capitalization of $150-220 billion on the offering, which should still happen in the coming months. Of course, Jack Ma can still take Ant out for an IPO in the U.S., but this move, will only exacerbate tensions with the Chinese authorities, which will further hurt the business.
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