Ant Financial's IPO: Expectations and Reality

Want to buy retail products online?
That too at a cheaper rate?
Which site will you prefer?
Obviously Alibaba.com
i.e. the Alibaba Group, one of the world’s largest E-Commerce Company founded by Jack Ma.

Ant Financial, its main affiliated company is the world's highest-valued FinTech Company. It is a China-based company founded in the year 2014 and develops FinTech Software related to:
• Electronic Payment Processing
• Banking Software
• Payment Through mobile
Its main application is Alipay which the Most Famous online payment App in China.
Ant Financials had recently planned to launch an IPO.

What is an IPO?
IPO [Initial Public Offer] is an offer where the company gives ownership rights in the form of Shares and raise funds and capital from that investor.

Ant Financial and IPO
Ant Financial had planned to launch an IPO in October with a target to raise $37 billion from the market. This IPO was the world’s largest IPO beating the Saudi Aramco of $29.5 billion in 2019.
The IPO was to be listed on Hong Kong and Shanghai stock exchanges but it got first suspended by Shanghai Stock Exchange and this prompted the Hong Kong stock exchange also to suspend it. The failure of such a big IPO does not have one but multiple reasons:
• After getting the news of this IPO, the investors in the Shanghai and Hong Kong Stock Exchanges started taking loans for getting the shares in the IPO which would have led to an increase in the borrowed funds of the economy and the other thing was that China’s lending is very tightly regulated which pressured the Stock Exchanges to freeze the IPO.
• The founder Jack Ma criticized China’s machinery as “outdated”. Ma also criticized China’s Financial System by saying “China does not have systematic financial risk problem” and said Chinese banks as “Pawnshops” which gives loans to companies that do not need money.
• Further, the regulators of the stock exchanges said that the IPO was frozen as the Ant Group failed to meet information disclosure requirements. The statement of the Company stated that there was a “significant change” in the regulations related to online lending and so the IPO was frozen.

Effects after the IPO failed: -
• The Share Price of Alibaba (parent company of Ant Financial) dropped by 9-10% in a day.
• Jack Ma’s total wealth dropped by $3 billion after the IPO got frozen.

What were the effects on Indian Market?
• The main software of Ant Financial was Alipay and it is limited only till China and not used in India, so Indian Digital market had no effects.
• Ant Financial was about list their shares in Shanghai and Hong Kong Stock Exchanges and not Indian Stock Exchanges so because of it, there was no effect on Indian Stock Exchanges.

Thank you.

Regards,

Nirmal Trivedi,

Kautilya,

IBS Mumbai.