Ant IPO Hopes Squashed by Regulators

(Update) Responding to a Reuters report, Ant Group and China's securities regulator said no IPO is yet in sight.
Jun. 09, 2022 19:05
Ant IPO Hopes Squashed by Regulators

(Updated to reflect official responses to media reports)

(CapitalWatch, June 9, Hong Kong) Hopes of a revived Ant Group initial public offering were quickly stomped out Thursday after the China Securities Regulatory Commission denied claims that it had given the go-ahead. 

After speaking with anonymous sources, Reuters reported earlier that Alibaba's fintech arm Ant had gotten a tentative green light from regulators for an IPO.

Shortly after, the regulator released a statement saying it had not conducted "evaluation and research work" regarding an Ant IPO. The company also publicly stated that it doesn't have plans to relaunch its IPO.

The suspension of Ant's $37 billion IPO was a standout event amid Beijing's crackdown on big tech. 

Since its IPO was put on ice in November 2020, Ant has undergone a massive restructuring campaign. In order to meet regulatory requirements, Ant has broken up parts of its company and dramatically changed operations.

A reversal would have been another major bolster for the sector, but there are already signs that China is easing its grip on companies. 

Chinese tech stocks have been on the rise this week as regulators concluded their probe into ride hailing giant Didi (NYSE: DIDI). Regulators have also resumed approving video game titles in China in April. These signs, among other positive remarks from officials, have added to a growing wave of optimism that the sector will turn bullish again. 

The country's electric vehicle companies are also seeing recovery from the massive pandemic-induced manufacturing disruptions seen earlier this year. Macroeconomic conditions are still fraught, but the slight recovery of some industries mixed with increased government support is doing wonders for investor sentiment.

Although the sector is on the rise, Ant's official response sent Alibaba (NYSE: BABA; HKEX: 9988) shares down 8.13% Thursday. 

The fintech company was also recently caught up in another investigation.

In January, Chinese state media released a documentary on the corruption probe of a former Hangzhou official. Although the documentary did not name Ant, it alleged that the politician's brother received "unreasonably high payments" from private companies in exchange for government policy incentives and real estate deals.

The companies that benefited from the preferential policies or real estate deals were unnamed, but the Financial Times found that in 2019, a unit of Ant Group bought two plots of land at a discount in Hangzhou after obtaining stakes in two mobile payment businesses owned by the official's brother.

Ant hasn't made any comments about resuming its IPO plans beyond its vague denial, so only time will tell if the company decides to try again. Insiders told Reuters that the company would keep any plans under wraps before it goes forward reviving what would have been the world's most expensive IPO.