Jack Ma's Ant IPO Isn't Dead in the Water Just Yet

Contributors: Lulu Chen and Alex Millson

Updated on February 3, 8:50 PM EST

What You Need To Know

China ordered fintech giant Ant to become a financial holding company that will be regulated more like a bank. The move will have far-reaching implications for Ant's growth and ability to press ahead with a landmark initial public offering that the government abruptly delayed late last year.

The directives came as China’s regulators pledged to curb the “reckless” push of technology firms into finance and crack down on monopolies online. The twin pillars of Ma’s empire — Ant and e-commerce giant Alibaba — have been at the center of the increased scrutiny, sending a message to the country’s largest corporations and their leaders to fall in line with Beijing’s priorities.

Authorities directed the firm to open its payments app to competitors, increase oversight of how that business fuels its crucial consumer lending operations, and ramp up data protections. It will also need to cut the outstanding value of its money-market fund Yu’ebao.

Key Coverage

By The Numbers

$35 billion The value of the IPO that China blocked
$3 trillion Orders received from individual investors for the IPO
1 yuan The smallest amount users can park in Ant's Tianhong Yu'e Bao Money Market Fund that holds about $173 billion in assets

Why It Matters

While the revamp leaves Ant’s main businesses intact, regulators are making it harder for the firm to exploit synergies that allowed it to direct traffic from its payments service Alipay -- which has a billion users -- to other financial services, including wealth management, consumer lending and even on-demand neighborhood services and delivery.

It's the first step for Ant's revival of an IPO, something that Chairman Eric Jing promised staff would eventually happen. However, prospects about the listing valuation and timeline remain uncertain. Bloomberg Intelligence analyst Francis Chan has estimated the firm’s valuation may drop about 60% from the $280 billion it was pegged at last year given the rule changes being contemplated in areas including payments.

Beijing’s intervention in Ant’s IPO reverberated across financial markets, causing global investors to question China’s consistency when it comes to policy measures. It sent a clear message that the country’s financial opening up will only be done on terms that benefit President Xi Jinping and the Communist Party. In a wider context the move, like episodes such as the collapse of Germany’s Wirecard AG or the difficulties surrounding Facebook’s Libra digital currency, reflects the global struggle by regulators to catch up with the pace of innovation from independent payment providers and creators of digital currencies. The challenge for authorities worldwide is how to spur financial innovation that can be useful, without losing control.

Bloomberg

Here’s How Ant Can Rise Again After That IPO Shock

Regulators want it to be more fin than tech, and Jack Ma will need to retreat further into the wings.

Tim Culpan