China's rejection of Ant Group's initial public offering will "certainly put a damper on new issues for a period of time. Not just in Asia, but also by China financial technology companies more generally," financial experts said Wednesday.
"At least until clarity has been obtained on the regulatory front," one expert said.
China's financial regulators temporarily pulled the plug on Ant Group's jumbo public listing in a move that analysts say will "certainly put a damper on new issues" among China financial technology.
"This is all very surprising, especially since the listing hearing was previously processed in record time," Philippe Espinasse, former head of equity capital markets in Asia and author of 'initial public offering: A Global Guide', told Business Times on Wednesday.
Ant Group's public debut - when it eventually happens - is set to be the world's largest initial public offering as the Huanghzou-based company looks to raise up to $40 billion with simultaneous listings in Hong Kong and Shanghai.
In a Tuesday filing to the two bourse, Ant said it "may not meet listing qualifications or disclosure requirements" after mainland regulators held a meeting with senior company executives earlier in the week.
The delay comes weeks after Alibaba founder Jack Ma took a swipe at China's financial regulators in a premature victory lap when he chided the strict rules faced by companies in the country.
"Good innovations are not afraid of supervision, but they do fear outdated supervision," he said at a financial summit in Shanghai Oct 24. "Today the world, especially China, needs a lot of policy experts, but not experts in red-tape."
China's red-tape experts likely sounded the alarm over the large number of small loans being taken out on Ant's Alipay platform as authorities steer the Chinese economy away from accumulating bad debt.
"The volume of funds being handled through Ant, at a time when NPLs and credit issues are biting again in China" may be behind the unexpected delay, according to Espinasse.
On Monday, the People's Bank of China published a draft set of rules setting a 5 billion yuan ($746.8 million) registered capital threshold for online loan purveyors like Ant. Most significantly, these microlenders will need to fund at least 30% of the loans themselves - Ant currently has the facilities to fund around 2%.
Regulators seeking to make an example of Ma can't be excluded altogether, Espinasse noted. "I suspect that both sides will tread very carefully if any such conflicts are actually brewing behind the scenes."
Regardless, millions of retail investors will be waiting with bated breath to see the outcome.
Mom-and-pop investors in Hong Kong and the mainland bid $3 trillion for shares in the tech company, with the Shanghai retail tranche oversubscribed more than 800 times and the Hong Kong side by roughly 350 times. In light of the delay, some brokerages are offering refunds.
