An insight on Alibaba spin-off Ant Group and its suspended IPO
This article covers a brief overview of what you need to know about Ant Group – an Alibaba spin-off and the most talked-about fintech enterprise of the moment. Who owns Ant? Is it a mobile payment system, or is it more than that? Why are they heading for the stock market? What makes their IPO in both Hongkong and Shanghai a record-breaker? But also, why did it get suspended? And last but not least, we take a look at the future of finance.
First things first. In 2004, Jack Ma – founder of e-commerce giant Alibaba – came up with the brilliant idea of incorporating a payment platform on Alibaba called Alipay. In the meantime, Ant Group (the current name) has developed itself into one of the most valuable fintech firms in the world. With an estimated valuation of more than $300 billion, it already surpassed JPMorgan Chase. And, as The Economist puts it so eloquently in their second October edition, ‘payments are just the appetizer’. China’s largest fintech firm now provides many other financial services. These range from asset management to investment products to even health insurances and money lending.
Why are they heading for the stock market, one might wonder. In this way, they seek to raise money to finance both their economic growth and technological development. With more than a billion users – from which over 700 million monthly – Ant Group is huge in China. But this also makes it difficult to grow its market share much further there. The growth they aspire to generate will therefore mainly have to come from international expansion. In addition, massive investments are being made in the latest technologies – from artificial intelligence to biometric authentication. And therefore, money is needed.
This brings us to November 5. Ant Group would normally have entered the stock market that day in both Hong Kong and Shanghai. It was going to be the biggest initial public offering (IPO) in history. With $34.4 billion Ant was going to leave Saudi Aramco ($29.4 billion) far behind. Financial data seem to be the oil of the 21stcentury. Only, in extremis, China is blocking the largest IPO ever.
Then where did it go wrong? This involves the regulatory side of things. Tuesday November 3 – two days ahead of the historical IPO – the Shanghai Stock Exchange came with the breaking announcement that the IPO was being halted. Shortly afterwards, the news got in that the IPO in Hongkong would also be frozen. Chinese regulators stated that certain changes to the fintech-regulation would be far-reaching enough to delay the IPO. Without going into detail about the legal side of the story, it all comes down on China wanting its fintech companies to be subject to the same regulations as traditional banks. Jack Ma and his team have now around six months to both revive and retry the IPO.
Despite the suspension of their listing, this whole story fits in seamlessly within the shift we observe within global banking. Fintech is more booming than ever, and the global pandemic appears to have been a catalyst in this success story. In the end, Jack Ma still got it right when he in 2008 – reacting on how hard it was for small businesses to get loans – stated that “if the banks do not change, let’s change the banks”. To be continued.