China's President Xi Jinping personally made the decision to halt Alibaba Group Holdings (NYSE:BABA)-backed Ant Group's initial public offering, touted to be the world's largest IPO, a Wall Street Journal report claims.
What Happened: Ant Group could have raised $37 billion in its dual listing in China and Hong Kong, valuing the financial services company at more than $280 billion, but Chinese regulators suspended the listing, citing tighter regulations to protect the financial interests of consumers and investors.
The new regulations will force the Ant Group to rework its business model of being a bridge between borrowers and banks. If all rules were to be implemented, it would require Ant to raise more capital to back the loans it grants to customers and seek national licenses to continue its operations.
Reportedly, Alibaba founder Jack Ma irked the regulators in his speech on Oct. 24, where he criticized the Chinese government for tight financial regulations and holding back technological development. Ma said that he wanted to help solve China's financial problems through innovation.
Xi and other senior leaders, who read government reports about the speech, were furious. Reportedly, Xi ordered Chinese regulators to investigate and possibly shut down the IPO.
Why It Matters: The problems between wealthy entrepreneurs' growing influence in China and the state is not new. "Xi doesn't care about if you made any of those rich lists or not. What he cares about is what you do after you get rich, and whether you're aligning your interests with the state's interests," a Chinese official said, as per the Journal.
Ant's mobile payment system Alipay is used by roughly 70% of the Chinese population, disrupting the financial system. Ant has favored serving companies and small businesses ignored by the traditional banking system and has made loans to more than 20 million small businesses and roughly half a billion individuals.
Reportedly, regulators wanted to rein in Ant for long as it has been spared from the tough regulations and capital requirements that commercial banks have to adhere to.
Some analysts expect Ant's valuation to halve to $140 billion due to the IPO suspension and the new regulations.
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