Alibaba’s shares have divebombed more than eight per cent overnight after China blocked the largest initial public offering (IPO) in history from taking place.
Ant Group, the Chinese fintech company founded by Alibaba’s Jack Ma and 33 per cent owned by Alibaba, was due to launch a record breaking $37 billion IPO on the Shanghai and Hong Kong stock exchanges tomorrow.
However, on Monday Chinese authorities summoned Ant Group’s key executives, including Ma, to a meeting in which they were told Ant’s online lending business would face far tighter scrutiny.
According to Reuters, Chinese regulators moved to tighten rules for online micro-lending companies in a bid to rein in rising debt levels, informing Ant it would need to abide by these rules in order to list.
A day later, both the Hong Kong and Shanghai stock exchanges informed told Ant that “changes in the financial technology regulatory environment” would result in the company “not meeting the conditions for listing”, effectively suspending the IPO.
Some have suggested that the abrupt intervention from the Chinese authorities could have been a response to critical comments Ma made about China’s financial system.
Last month Ma, China’s richest man, said: “Today’s financial system is the legacy of the Industrial Age. We must set up a new one for the next generation and young people. We must reform the current system.”
Chief executive of management consultancy Enhance International Sam Radwan told CNBC: “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.
“Financial institutions know very well who calls the shots and they better take heed.”
Ant said in a statement to investors it “sincerely apologizes to you for any inconvenience caused by this development,”
“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.”