China considers reviving ant Jack Ma’s IPO as crackdown eases

(Bloomberg) — Chinese financial regulators have started initial discussions about a possible resumption of Ant Group Co.’s initial public offering, according to people familiar with the matter, one of the clearest signs yet that authorities are cracking down on the tech industry that started with the sinking of the world’s largest listing nearly two years ago.

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The China Securities Regulatory Commission has set up a team to review the fintech giant’s share sale plans, said one of the people, who asked not to be identified discussing private information. Officials are also approaching the final stages of issuing a long-awaited license to Ant that would pave the way for an IPO and make the company regulated more like a bank, the people said.

China’s central leadership has given a tentative nod to restart listing plans in Shanghai and Hong Kong, Reuters reported after the Bloomberg report, citing people with knowledge of the matter. The CSRC said in a statement on Thursday that it is not carrying out work to revive Ant’s IPO, although it does support eligible platform companies that go public in China and abroad.

While the timeline for an Ant license and its potential listing depends on approvals from Chinese leaders, evidence of progress on both fronts is likely to bolster investor optimism that the worst is over for the country’s private sector. Chinese tech stocks have soared in recent weeks, buoyed by a report that authorities are preparing to close an investigation into Didi Global Inc. and restore the ride company’s core apps to mobile stores.

A significant relaxation of restrictions on Ant and Didi – the most prominent victims of President Xi Jinping’s sweeping crackdown on the country’s tech giants – would send a powerful signal that policymakers are delivering on recent pledges to support the industry. The Communist Party’s evolving stance towards the private sector has become one of the most watched developments in global markets in recent years, with some observers even saying that China’s internet sector is uninvestable.

Alibaba Group Holding Ltd., which owns a stake in Ant, rose as much as 7% in premarket trading on Thursday, before falling after the CSRC statement.

Ant, controlled by billionaire Jack Ma, said on its official WeChat account that it is working on restructuring the company under the guidance of regulators and has no plans to initiate an IPO. China’s central bank did not immediately respond to requests for comment.

The government supports domestic and offshore listings of platform companies under the rules, Chinese Premier Li Keqiang said last month, without naming any companies.

“We now firmly believe that the worst is over for China’s technology, in particular from a regulatory perspective,” said Kerry Goh, chief investment officer at Kamet Capital Partners Pte in Singapore. “The impact of the economic slowdown is not yet known.”

The crush of Ant’s $35 billion IPO in November 2020 sent shockwaves across the financial world, burning investment firms like Carlyle Group Inc. It also ushered in a broader crackdown that ensnared some of China’s fastest-growing companies, wiped out more than $1 trillion in market value and caused a reckoning with the country’s billionaire class.

Ma, China’s most famous businessman, has all but disappeared from public view since he delivered a speech criticizing regulators on the eve of Ant’s IPO. Many of his colleagues have renounced their formal corporate roles and increased donations to charities to align with Xi’s vision of achieving “common prosperity”.

While investors are likely to get any signs that the tech clampdown is easing, a return to the heady days of 2020 seems unlikely. The myriad of regulations imposed on Ant over the past two years means the company is worth a fraction of what it once was, according to some early supporters. Fidelity Investments, for example, lowered its valuation estimate for the company to about $78 billion last June from $235 billion just before the IPO was abruptly put on hold.

China’s securities regulator is initially reviewing Ant’s plans for a listing in Shanghai, one of the people familiar with said. The company hopes to carry out a dual listing in Shanghai and Hong Kong, another person said. Ant intends to present a preliminary prospectus for its offering as early as next month, Reuters reported.

In a sign of progress, Ant recently appointed Hong Kong Stock Exchange Chairman Laura Cha as an independent director. The move was blessed by regulators in Beijing, people familiar with the matter said. Officials have also been speeding up decisions on Ant’s restructuring proposals in recent weeks, one of the people added.

Alibaba has surged in U.S. trading since the Wall Street Journal reported that China was close to ending investigations into Didi and two other companies, moves investors interpreted as a sign that some of the most defeated tech stocks finally must. be suspended. .

The Hang Seng Tech index in Hong Kong rose 36% from this year’s low in March, while the Nasdaq Golden Dragon China index of US-listed stocks jumped 53%. The latest index is still 62% below its peak in early 2021.

After derailing Ant’s IPO, regulators ordered the Hangzhou-based company to overhaul its operations and create a financial holding company for its wealth management, lending and credit-scoring businesses so they can be more strictly regulated.

Authorities are preparing to issue Ant with a financial holding license, the people said, although it is unclear how quickly a final decision on that will be made.

As part of the restructuring, Ant increased its capital base to 35 billion yuan ($5.2 billion) and began building firewalls in an ecosystem that previously allowed it to direct traffic from its billion-dollar payment app Alipay. users, for services such as wealth management, loans and delivery.

Consumer loans made jointly with banks – previously a major engine of growth – were separated from their “Jiebei” and “Huabei” brands. Assets under management of its Yu’ebao money market fund – once the world’s largest – fell 15% from a year earlier to 825 billion yuan in March.

(Updates with Reuters report in third paragraph, Ant statement in seventh)

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