With Ant Group’s highly-anticipated IPO halted, a finance law expert told KrASIA that the fintech giant now needs to wait for China’s new microloan regulation to become final in order to resume the listing process.
Wei Jingmiao, professor of financial law at the China University of Political Science and Law believes that the new regulation draft released on Monday is the direct reason leading to the suspension of the estimated USD 34.5 billion IPO, which could have been the world’s biggest fundraising deal in history.
“Half of Ant’s profit was from small loans. The policy change would cause a great impact on earnings, thus the group has to explain the risks clearly in its filings,” said Wei. “The Shanghai Stock Exchange has the right to suspend the public listing with the reason that it didn’t disclose enough information.”
Right now the new microloan regulation is at the stage of “soliciting public opinion.” Ant Group needs to wait for it to be formally implemented, so it can adjust its business structure as well as IPO filings accordingly and then file again, according to Wei, who has been studying China’s finance law for more than a decade. The stock exchanges will also need the official directive to audit and regulate fintech company’s IPOs, she added.
The regulation will affect every business that extends small online loans, including the fintech affiliates from internet companies like JD Digits and Tencent Finance. Ant Group, however, was caught in the final days ahead of its IPO.
Wei thinks that regulators could use the IPO pause to re-assess the impact Ant may bring to the ecosystem of the Star Market. “It’s like dropping a large whale into the pool, while the rest of companies on the board are mostly small and medium-sized,” she said.
Wei calls “excessive speculation” that some news reports suspect the sudden halt may be attributed to Jack Ma, Ant’s controlling shareholder, criticizing China’s regulation system in a late-October speech. “For the emerging fintech ecosystem, regulation can be lagging or be maladjusted,” she said. “Ma’s speech is not a bad thing for the regulators to further adapt and evolve.”
Attending Wednesday’s Hong Kong Fintech event, Tencent’s (HKG: 0700) president Martin Lau commented that many new players in the fintech market are looking for scale rather than quality, that innovation goes hand-in-hand with financial risk, and that business needs to work closely with regulators, local media Southern Finance News reported.
Tencent operates WeChat Pay, an online payment method whose market share in China has fallen behind Ant Group’s Alipay.
A spokesman of the China Securities Regulatory Commission told local reporters that the CSRC supports the decision of the Shanghai Stock Exchange, saying that it is responsible to the investors and the market, avoiding Ant Group to be listed hastily after a change in the regulatory policy environment, according to Shanghai Securities News.
Various brokerage companies in both Hong Kong and the mainland market announced that they will refund retail investors’ registration fees, operational fees, and some interest charges.