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Shanghai, Hong Kong suspend Ant Group’s IPO

Jack Ma’s Ant Group IPO has been suspended by the Shanghai Star board. Yahoo Finance’s Akiko Fujita discusses.

Video Transcript

MYLES UDLAND: Let's turn our attention now to some surprising news in the IPO space. And this coming from Ant Group, the IPO set to go off on the Shanghai Stock Exchange, as well as the Hong Kong Stock Exchange. They have both been suspended. Akiko Fujita joins us now with the latest on this development.

And Akiko, there was a story yesterday that I saw on the FT that was picked up a few places, but kind of overlooked that Jack Ma had met with Chinese securities regulators for a talking to of sorts. And here we are, less than 24 hours later, and now the IPO is on hold.

AKIKO FUJITA: Yeah, there was certainly some questions even surrounding the IPO here. But remember, we were-- these shares were supposed to start trading on the 5th of November. So really, a last minute suspension here.

The article you're alluding to, Myles, is from the Financial Times, talking about how the PBOC, People's Bank of China, as well as securities regulators in China, met with not just Jack Ma, but two other executives from Ant Group, including Ant Group's chairman, Eric Jing, and chief executive, Simon Hu.

Now no specifics being coming out of that in terms of what was discussed there. But the way the FT characterizes this is that those interviews were described as using this Chinese word that essentially indicates a dressing down by authorities.

Now, having said all of that, we do now know that Shanghai Stock Exchange, the Star Board there where Ant Group was expected to list in a dual listing, that trading has now been suspended. That IPO will not go forward, and we've gotten confirmation from Ant Group that the exchange or that the IPO on the Hong Kong Exchange has also been halted right now.

It is still just a suspension as far as we know, according to Ant Group, but a significant development, given that this was expected to be anywhere from $35 to $37 billion, the largest IPO in history. It would have been a huge, huge splash for China, especially with that Star Board trying to compete with the NASDAQ. But we're still waiting to get any more specifics on what specifically the concern was from regulators over in China that led to the suspension.

JULIE HYMAN: Akiko, it's Julie here. I want to ask you, sort of to take a step back about the bigger picture here. Because this Ant Group IPO isn't just about this company, right? It's also about the sort of decision it made to list over in China in the first place, the competitiveness between the US and China in terms of listings. And so, I wonder what this delay, for whatever reason it is, what that does to that sort of point of pride that China had perhaps had in getting this giant listing.

AKIKO FUJITA: Yeah, I mean, there's no question that China wants to make this splash with this kind of IPO. But there also are concerns about the growing influence of a company like Ant Group and the huge-- the sheer scale of their operations.

You know, a lot of people in the US may not be familiar with how Ant Group operates, but this isn't just a payments platform that we talk about with Alipay. This is something that is being used for loans, for so many different facets of everyday Chinese life. And so, there have been concerns from the regulatory side about just the scale and influence of this company.

Now, having said that, I'm not privy to any conversations that happened between Jack Ma and the regulators and what specifically was raised that led to this suspension. But you're certainly right. The Ant Group IPO was one that so many major changes around the world certainly wanted, just given the scale of it. This dual listing was meant as a huge message, seeing the listing in Hong Kong, as well as Shanghai, that they can, in fact, draw these big tech IPOs, particularly the Chinese ones, closer to home.

And Julie, we were talking about this last week I think about how this was so significantly oversubscribed. There was a huge demand for that IPO from Chinese investors, but also international investors through the Hong Kong exchange.

So we'll certainly see if this is just kind of a hiccup on the way to an IPO, whether it's regulators wanting to check specifics about how Ant Group plans to operate moving forward, or it leads to a cancelation altogether. But we're going to continue to follow any headlines that come out on that front.

MYLES UDLAND: And I think also, Akiko, thinking about the broader investment climate in China, this IPO was supposed to maybe signal that things had changed. And yet, you know, referring back to this FT story, they're connecting some comments Jack Ma made last month essentially criticizing the state of the Chinese financial system as perhaps the trigger for this review and thus makes one wonder if anything has changed at all with respect to how China views its role with companies that operate in its country.

AKIKO FUJITA: Yeah, I mean, at the end of the day, if you look at a company like Ant Group, you have to go through the government. I mean, there are regulators who are overseeing these things very, very tightly, more so than any other market that we talk about.

So, you know, you're certainly right that China has tried to make some inroads here towards reform. The Star Board was seen as a huge point of pride at a time when we've seen just massive valuations for these Chinese tech companies' huge growth, although we should note a lot of these Chinese companies have grown just in their home market.

Regardless of that, the Chinese government's really wanting to tout that. This was seen as really the pinnacle of all of that. But now we're seeing that, you know, there is a tight hand in the market. And that's-- Ant Group certainly knew that going into this, but we'll see if any concerns on that front can be resolved.