Sliced Up and How: Ant Group IPO Fiasco Set to Cost Jack Ma Dearly

Must Read

Elon Musk Added Over $100 Billion To His Net Worth In Just 1 Year, Leaves Jeff Bezos Behind

Jeff Bezos may the world's richest person in the world but it's Elon Musk who has been...

iPhone 12 Plagued With Serious Problems: Should You Buy It, Still?

A serious problem with Apple iPhone 12, identified recently, is good enough to give a second thought...

Elon Musk Overtakes Bill Gates And Becomes the 2nd Richest Person in the World

It's been a good week for Elon Musk and his electrical vehicle business Tesla. Earlier this week,...

As soon as Jack Ma chose to make those startling comments at the Shanghai Conference, in plain view of the Chinese regulators no less, poked the bear.

Well, the bear turned and trampled down Ant Group’s promising IPO, which has sustained its latest blow.

In the aftermath of the stopper on their IPO offering, Ant Group’s valuation is set to be slashed by over $150 billion.

Advertisements

The new regulations proposed on micro-lending by the Chinese regulatory authorities are what constitute the fly in the ointment. Facing a huge downside in valuation, as a result, a steep drop in the pre-IPO price-to-book ratio could see Ant’s valuation undercut to that top global banks, making it more akin to them rather than the fintech giant that it originally is.

The development is in stark contrast to what was to be weeks prior when the promising projected pre-IPO market valuation was set at $315 billion. The shocking pullback of the listing is on the verge of making the company’s worth less than what it was a couple of years ago when it raised money from some of the world’s most eminent funds including Warburg Pincus LLC, Silver Lake Management LLC, and Temasek Holdings Pte.

Expressing their reservations on the heightened investor interest in the now-suspended $37 billion IPO, CBIRC has now released its preliminary set of draft rules (open and subject to change) which will monitor lending and frequent reporting. The top brass in China has long been pensive on online micro-lending companies and how they stand to impact investors and the public markets in the future.

The draft rules will see large online microlending companies will be supervised by central regulators instead of local bureaus. The rules have put a ban on regional banks from lending outside their provinces through online platforms, which in the past, have been the biggest users of the digital platforms to find borrowers outside their locale.

All in all, the sharp rebuke to Jack Ma is what has the Ant Group facing the music. Ma, Ant’s co-founder who controls 50.5% of its voting rights, has managed to permeate the lives of everyday Chinese citizens by enabling microloans. Embracing the use of big data to accurately assess borrowers’ credit profiles in order to identify the most creditworthy businesses and individuals, the crux of Ant’s fees earning strategy is providing a digital platform for banks to reach small borrowers and extend bite-sized loans.

Advertisements

Another thing worth noting is that Ant Group has always proclaimed itself as a capital-light business. With the changes brought forth by the upper Chinese echelon, the move is going to hit Ant Group hard, compelling it to hold additional capital, which could go as far as 50 billion yuan ($7.56 billion) to 90 billion yuan under the joint funding proposal.

As it stands, there has been a joint lending model proposed by Beijing, whereby internet platforms should fund no less than 30% of total loans. However, the Chinese officials’ perspective, which sees growth in the micro-lending sector as a systemic risk, is expected to cause Ma and Ant Group more impediments in the future.

Soon after announcing the suspension of Ant Group’s IPO Jack Ma lost $3 billion in net worth. Now, after the estimated $150 billion cut in valuation of Ant Group, the net worth of Jack Ma is bound to tank like never before.

The situation, as it has unfolded, could well exacerbate. The very public fallout from the suspension of Ant’s IPO has the potential for damaging China’s reputation for sound management of capital markets and its financial hubs if a solution is not quickly worked out.

As for Ma and his 16-year-old Hangzhou based company, it will have to rebuild following granular instructions from the authorities. As of now, the future of what was set to be the world’s largest fintech company hinges on how it chooses to re-emerge from this debacle.

Stay tuned to this space for more updates.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest News

Backed By First-Time Shoppers, Flipkart And Amazon Dominated Festive Online Sales in India

It seems like Flipkart and Amazon squeezed the most out of the month-long festive season in India...

Amazon Gets Slapped With Penalty As GOI Prepares To Tighten The Noose On Ecommerce Players!

In a recent move, the Indian Government slapped Amazon on its wrist for not mentioning the country of origin detail for products...

Facebook’s Past Comes Back To Bite As South Korea Fines Them For 2018 Scandal

The social media behemoth Facebook Inc. (NASDAQ:FB) has once again proved they are the true arch-nemesis of modern-day user-privacy!

Amazon Future Group Dispute Deepens As Singapore Court Turns Down Future Group Plea

The dispute between Amazon and Future Retail is, apparently, far from over anything soon as the Singapore International Arbitration Centre (SIAC) has...

Google Pay Fee On Instant Transfer: An Indication Of Google’s Aggressive Monetisation Strategy?

Google has decided to levy fee on instant payment, starting from the US market. A few days back, Google...

Twitter Account Verification Is Back, But Has it Lost Its Mojo?

Twitterati queue up! As the Twitter account verification process which is responsible for awarding blue badges prepares to...

In-Depth: Dprime

Will ‘TikTok By Microsoft’ Be A Winner?

For the last two years, TikTok has been in the public eye for all sorts of reasons. First, it was the exploded...

Facebook Subscription Model: Looking Beyond Ad Dollars?

Seldom do job listings create a stir this gripping. However, when the job listing in question is a stealth post from Twitter,...

Will The Online Food Delivery Market in India End Up Becoming A Two-Horse Race?

It's pretty much evident that the food delivery space in India is all set to get riled up soon enough as one...

More Articles Like This