Ant Group‘s initial public offering (IPO) could be delayed by six months and its valuation reduced by quite a lot after its delay this week, a report from the Financial Times says, as new regulations come into play.
Shares for China’s biggest financial technology group were set to raise $37 billion in a double IPO, with Ant Group listing on both Shanghai and Hong Kong, in what would have been the biggest IPO on record.
However, Shanghai Stock Exchange put the stop to the listing on Tuesday night (Nov. 3), one day after Beijing debuted a set of regulations that would have forced Ant Group to re-do its business model. According to lawyers involved with Ant Group’s proceedings, the company would have to respond to Chinese regulators’ demands and submit a new IPO prospectus in Hong Kong. That, according to Ant Group, could take as much as six months.
The draft regulations could end up being a serious change for Ant Group, which has a lending business drawing around 40 percent of its sales from the first half and impact the company’s valuation. Under the rules, internet platforms are required to provide at least 30 percent of their funding for loans at Rmb300,000, or $44,843, or a third of a borrower’s annual salary — whichever is the lesser number.
The changes, according to FT, could pose a significant difference for Ant’s risk profile, as the company currently works as a high-tech matchmaker between banks and borrowers. The publication said the shift in regulations could force Ant to operate more like a bank, which is a highly regulated sector.
The IPO suspension, PYMNTS reported, likely came from the top sector of the Chinese government, possibly even from president Xi Jinping, according to unnamed sources speaking with the Financial Times. The news outlet said officials in Beijing were concerned about the massive investor interest in the IPO, which they worried could impact the public markets.
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