The Shanghai stock exchange announced postponing Ant Group's colossal initial public offering, a day after Chinese regulators weighed a slew of new fintech rules and summoned Jack Ma and other top executives to a closed-door meeting.
The rare talk between China's top financial regulators and Ant, which revealed "major changes in the fintech regulatory environment," may disqualify the firm from listing on November 5, the bourse said in a statement on the evening of November 3.
It's unclear what those "changes" are, though the bourse has ordered Ant to disclose them. It's worth noting that in late October, Ma gave a provoking speech criticizing China's financial regulation. The conference was attended by China's senior leaders and later stirred widespread controversy.
Ant has halted its IPO in Hong Kong, where it planned to list concurrently, upon receiving the notice from Shanghai, the firm announced in a statement.
"We are sincerely sorry for any inconvenience brought to investors. We will properly handle follow-up matters following compliance regulations of the two exchanges," it said.
Ant has over the years tried to be in the good graces of the authorities. When it rebranded from Ant Financial to Ant Technology this year, the gesture was seen as an attempt to shed the firm's image as an intimidating financial giant and stress the one of a benevolent technology provider. The campaign began a few years ago, prompting the firm to devise awkward coinages like "techfin" (as opposed to "fintech") and declare it wasn't competing with traditional financial institutions, many of which were state-led.
The promises weren't merely a show. Ant has slowly grown into an online marketplace matching hundreds of millions of customers with financial products offered by traditional players. It's also brought on as shareholders heavyweight state actors like the National Social Security Fund and China International Capital Corporation, which are slated for handsome returns from their investments.
But the amount of reassurance did not seem enough. China's financial authorities released a new wave of proposals on Monday to rein in the fintech sector, days before Ant was scheduled to raise $34.5 billion in the world's largest initial public offering. The draft, though not explicitly aimed at Ant, coincided with the financial regulators' meeting with Ant executives.
"Views regarding the health and stability of the financial sector were exchanged," an Ant spokesperson told TechCrunch earlier in a statement. "Ant Group is committed to implementing the meeting opinions in depth and continuing our course based on the principles of: stable innovation; embrace of regulation; service to the real economy; and win-win cooperation."
The message was clear: Ant strives to abide by Beijing's wishes.
"We will continue to improve our capabilities to provide inclusive services and promote economic development to improve the lives of ordinary citizens," the firm added.
The proposal was just the latest move in China's ongoing effort to bring stability to its flourishing fintech sector. The draft rules include a ban on interprovincial online loans unless otherwise approved by authorities; a maximum online loan amount of 300,000 yuan ($45,000) for each individual; and a 1 billion yuan registered capital threshold for online microloan lenders.
At issue is Ant's ballooning lending business, which contributed 41.9 billion yuan or 34.7% to its annual revenue, according to the firm's IPO prospectus. In the year ended June 30, Ant had worked with about 100 banks, doling out 1.7 trillion yuan ($250 billion) of consumer loans and 400 billion yuan ($58 billion) of small business loans.
Over the years, China's financial regulators have dropped numerous other policies limiting the expansion and profitability of fintech players. For instance, Ant's payments service Alipay and its rivals could no longer generate lucrative interest returns from customer reserve funds starting last year.
The article was updated on November 3, 2020 with Ant's announcement.