China’s move to suspend Ant Group’s anticipated blockbuster initial public offering (IPO) likely came from the top echelon of the Chinese government, according to a report in the Financial Times.
The suspension came just two days before shares of Ant Group were to go live on the Hong Kong and Shanghai stock markets.
An order of such magnitude is likely to have come from the upper reaches of the Chinese government and possibly even President Xi Jinping, FT reported, citing two sources familiar with the situation.
Officials in Beijing were concerned about explosive investor interest in the planned $37 billion IPO by the world’s largest FinTech and how it might impact the public markets, according to the news outlet.
Explaining the move to puzzled investors on Wednesday (Nov. 4), Wang Wenbin, China’s foreign ministry spokesman, said the decision to suspend the Ant Group IPO was made to “better maintain the stability of the capital markets and to protect investors’ interests,” the Financial Times reported.
That decision comes against the backdrop of a superheated market for the Ant IPO in the days leading up to its suspension, with individual and institutional investors scrambling to pay sky-high prices in order to get a piece of the offering.
A collective $2.7 trillion was chasing the Ant Group IPO, with retail bids coming in at 870 times over the value of the shares on offer, according to the news outlet.
Chinese regulators are also growing concerned about the breakneck growth of Ant Group’s lending business.
Ant’s lending business not only generated 40 percent of its sales during the first half of 2020, but it also accounted for 10 percent of all consumer loans in China, the FT reports.
Ant Group, in turn, has been outsourcing the risk, using partner banks to make the loans and then reselling them later as securities, retaining just 2 percent of these deals on its own books.
New regulations drafted by Chinese officials are aimed at reining in Ant Group’s lending business, requiring Ant itself to put up at least 30 percent of the money on loan deals and to cap lending amounts at either a third of a borrower’s salary, or $44,843, depending on which is lower, according to the Financial Times.