FinTech: Of Jack Ma’s Foot-in-Mouth, Irate Chinese Regulators, And A Non-Starter $37B IPO

November 4, 2020 | FinTech, News
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Ant Group has had to pull its mammoth $37 billion IPO.

Chinese authorities pulled rank on Jack Ma following his abrasive comments at the Bund Summit in Shanghai last month, and Ant Group pulled its IPO. Some of Ma’s comments are quoted below:

“The Basel Accords are like an old people’s club” … finance should rely less on big banks and more on an ecosystem of “lakes, ponds, streams and brooks” that carry capital into the different corners of the economy … escape this “pawnshop” mentality of banks taking collateral for loans and towards credit-ratings based on big data.”

“We shouldn’t use the way to manage a train station to regulate an airport. We cannot regulate the future with yesterday’s means.” (Chris Skinner’s Blog)

Jack Ma and Ant Group hauled up

Chinese authorities struck back by rewriting the rules for online micro-lending and imposing stricter capital requirements.

They also summoned Jack Ma and top Ant Group executives to a closed-door meeting the same day. There is speculation that it was in effect a dressing down.

According to South China Morning Post, the meeting led to “significant change” to Ant’s business environment, which may result in the fintech company not fulfilling the listing requirements or disclosure rules, according to Ant Group’s statement to the two bourses.

With the rules of the lending game changed, and compliance to be assessed afresh, the Ant Group had to call off its mammoth IPO.

That set in motion one of the largest refunds to investors in history. Retail investors had plowed in over $3 trillion into the IPO, which was proposed to be dual listed. Many of these investors had borrowed on margin to invest in the issue. They were hoping to make a fast buck from a listing profit.

Chinese authorities clarify

According to FT, the Chinese government said today that it halted the IPO to “better maintain the stability of the capital markets and to protect investors’ interests.”

The FT surmised that the marching orders issued to the Ant Group’s IPO may have originated at the very top of the Chinese government – possibly from President Xi Jinping himself.

The FT also said that Ma had probably battled to stymie the proposals given their impact on Ant. The outburst on the Bund podium may have been the result of these frustrations.

But the bottom line is that the Chinese authorities have shown, in no uncertain terms, exactly who is the boss.

Related Story:    Ant Group Gets China’s Go-Ahead For Mammoth IPO in Hong Kong                                               

                  

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