Ant Group: Beijing gives initial nod to revive USD 37 billion IPO after crackdown cools

Signs of softening stance have raised hopes of reviving the IPO

Ant Group: Beijing gives initial nod to revive USD 37 billion IPO after crackdown cools

Ant Group: Beijing gives initial nod to revive USD 37 billion IPO after crackdown cools

According to sources, the Chinese Central leadership has given a green signal to Jack Ma’s Ant Group, to revive its IPO. This was seen as a clear sign that the government was relaxing its crackdown on the tech sector in China.

According to the same sources, who did not wish to be identified, the company aims to file a preliminary prospectus for the offering in Shanghai and Hong Kong as soon as next month. Ant Group is a subsidiary of e-commerce giant Alibaba Group Holding Ltd.

Adding to this news, one of the sources said that the company would have to wait for guidance on the specific timing of the prospectus filing, from the China Securities and Regulatory Commission (CSRC).

However, in a statement released publicly, the company stated that there was no immediate plan to relaunch the IPO. Ant Group also did not indicate whether it had received approval from the Chinese government.

In November 2020, the company’s stock market listing was abandoned at the behest of the Chinese government. At the time, the company was valued at USD 315 billion, and planned to raise USD 37 billion from the IPO, which would have potentially set a world record for an IPO.

According to the statement, Ant Group said that it was working steadily on rectification work, and did not have any plans to reinitiate an IPO. The CSRC also declined to comment on the matter.

A separate source with direct knowledge of the matter stated that Ant was keeping a low profile with the IPO plans, in light of the high profile regulatory glare it received in 2020 with what was touted to be the world’s largest equity float.

After founder Jack Ma gave a speech in Shanghai in which he accused the government of stifling growth and innovation, the Chinese government cracked the whip on Ma’s business empire, beginning by pulling the plug on the IPO.

The crackdown on the IPO marked the beginning of a regulatory crackdown on the native tech industry, which quickly spread to other sectors like real estate and private education. This crackdown saw billions of dollars worth of market cap being wiped out, and triggered layoffs in several companies.

In a politcally sensitive year in which Xi Jin Ping is seeking to secure an unprecedented third term as party leader, the government is attempting to loosen its grip on the private sector in an effort to meet a growth target of 5.5 percent. Observing economists have predicted that this would be a tough feat, given the recent lockdowns across the country.

A revival of the IPO may also mark a rehabilitation of sorts for Ma, who has been maintaining a low public profile since the government clamped down.

China in talks with Ant Group

Last month, Chinese Vice-Premier Liu He, told technology executives that the Chinese government will support the development of the sector, and would provide support to companies wanting to list in China and abroad.

Earlier on Thursday, it was reported that government regulators had commenced talks with Ant Group regarding a potential revival of its stock market listing. It was also reported that the securities regulator had appointed a dedicated team to discuss the potential IPO plans of the company.

Alibaba, which owns one-third of Ant, saw its US-listed shares go down by 7 per cent, after rising by almost 7 per cent in pre-market trading on the back of reports of a rescheduled IPO.

Warburg Pincus, a US-based private equity firm, lowered its valuation of the company to approximately USD 180 billion at the end of March, down from USD 221 billion a year earlier.

The government regulators have directed Ant to restructure the company as a financial rather than a tech firm, and sources and analysts have said the financial sector typically carries lower valuations.

Dickie Wong, Executive Director of Hong Kong-based Kingston Securities, said that the size of Ant and the proposed IPO would have to be much smaller than planned in 2020, due to changed market conditions.

Shares of Chinese technology and e-commerce firms listed in the US, including Alibaba, gained this week after the government hinted at softening its 36-month crackdown on the sector.

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