/Ant Group’s record $34.5 billion IPO in Shanghai and Hong Kong is suspended

Ant Group’s record $34.5 billion IPO in Shanghai and Hong Kong is suspended

SHANGHAI, China — Ant Group’s world record-setting initial public offering in Shanghai and Hong Kong has been suspended.

The Shanghai and Hong Kong stock exchanges made the announcement on Tuesday. Alibaba, which owns a roughly 33% stake in Ant Group, saw its Hong Kong-listed shares tumble by more than 7% in Asia trade on Wednesday.

Ant Group’s controller Jack Ma, executive chairman Eric Jing and CEO Simon Hu were summoned and interviewed by regulators in China, according to a statement Monday from the China Securities Regulatory Commission.

On Tuesday, the Shanghai Stock Exchange referred to that meeting in explaining why it has suspended the IPO.

It said Ant has reported “significant issues such as the changes in financial technology regulatory environment,” according to a CNBC translation of the statement from Mandarin. “These issues may result in your company not meeting the conditions for listing or meeting the information disclosure requirements.”

As a result, the exchange decided to suspend the company’s listing on the Science and Technology Innovation Board, also known as the STAR Market — China’s version of the tech-heavy Nasdaq.

Shortly after, Ant Group said the listing of the Hong Kong shares will also be suspended.

Ant Group was gearing up to raise just under $ 34.5 billion in what would have been the world’s biggest initial public listing. It was planning on a dual listing in Shanghai and Hong Kong on Thursday.

In a statement to CNBC, an Ant Group spokesperson apologized for the suspension of its IPO and will work through the regulatory concerns with the Hong Kong and Shanghai stock exchanges. The company said it suspended its Hong Kong listing after being informed by the Shanghai Stock Exchange that the IPO would be delayed.

“Ant Group sincerely apologizes to you for any inconvenience caused by this development,” the statement said. “We will properly handle the follow-up matters in accordance with applicable regulations of the two stock exchanges. We will overcome the challenges and live up to the trust on the principles of: stable innovation; embrace of regulation; service to the real economy; and win-win cooperation.”

On Monday, the Chinese central bank and regulators issued new draft rules for online micro-lending, which could affect Ant Group.

In a statement, an Alibaba spokesperson said the company would support Ant Group through the regulatory hurdles.

“We will be proactive in supporting Ant Group to adapt to and embrace the evolving regulatory framework,” the spokesperson said. “We have full confidence in Ant Group colleagues’ ability to do a good job. Society has high expectations for Alibaba. We will continue to work hard to not only meet but exceed expectations and fulfill our responsibility to society.”

Jack Ma comments in focus

Late last month, Alibaba founder Jack Ma made some comments that appeared critical of China’s financial regulator.

“Today’s financial system is the legacy of the Industrial Age,” Ma said. “We must set up a new one for the next generation and young people. We must reform the current system.”

Sam Radwan, CEO of management consultancy Enhance International LLC, said his comments may have played a role in the suspension of Ant Group’s IPO.

“I don’t think it served well (for) Jack Ma to criticize the entity that will demand the full cooperation of Ant Group on their ongoing reforms, moving forward,” Radwan, who advises China’s banking regulator, told CNBC by email.

“Financial institutions know very well who calls the shots and they better take heed.”

For the last few years, Chinese regulators have been growing concerned about the rise of fintech platforms offering loans and whether they pose a systemic risk to the economy. Authorities have also been keeping an eye on companies like Ant Group, which they see as providing bank-like services despite not being a bank.

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