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Why China Slashed Jack Ma's Ant IPO Hopes, Experts Explain

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Why China Slashed Jack Ma's Ant IPO Hopes, Experts Explain

Alibaba Group Holding Ltd (NYSE: BABA)-owned Ant Group’s initial public offering may have been scuttled by Beijing due to its "disinclination to allow entrepreneurs out of their lane," Duncan Clark, author of "Alibaba: The House that Jack Ma Built" told the Financial Times.

China's Fintech Ambitions: Financial stability, a keynote policy of China’s President Xi Jinping, is taking center stage amid the emerging rivalry with the United States. The intent to shore up this stability was likely a key factor in the Chinese Communist Party's decision to halt the IPO, FT reported Wednesday.

“The Communist party is pushing back,” Clark told FT. Ma putting the internet to good use in the commerce sector might have gone with the Chinese government, but "applying this chemistry to the financial sector is on another level it seems."

Ant might have started as a payments company alone but has come to challenge the dominance of government-run institutions like ICBC and the China Construction Bank, FT noted.

Ma's Bravado Not Well-Received: The group founder Jack Ma’s stand against the country’s bankers and regulators is also said to be another important factor.

“The speech by Jack Ma in Shanghai suggests he wanted to openly challenge the regulator which is unacceptable,” a senior executive at a Chinese bank told FT. Chen Zhiwu, a professor of finance at Hong Kong University, suggested the regulatory crackdown has to be a result of Ma's comments.

The professor also noted that China’s Xinhua News agency publicly attacked Ma, post the speech.

Don't Be So 'Casual:' The night Ma and other Ant executives were summoned by China’s regulators, Xinhua published a cryptic article, first noted on Momentum Works’ blog, titled “Don’t talk casually, don’t do things casually, and people should not be casual.”

The Chinese language article featured a painting by the Japanese artist Kaii Higashiyama, which shows a horse in the clouds. Ma’s Chinese name Ma Yun literally means Horse and Clouds.

The line immediately above the painting in the article reads, “Everything has its costs, if you do not have the capital, please do not do whatever you want.”

The suspension of the IPO has led to an erosion of $3 billion in Ma’s own wealth but he is still valued at $56.1 billion.

A Chinese foreign ministry spokesperson said Wednesday that the IPO suspension was a required measure and it was needed to “better maintain the stability of the capital markets and to protect investors’ interests,” according to FT.

Price Action: Alibaba shares traded 4% higher at $307.72 in the pre-market session Thursday.

Photo courtesy: World Economic Forum via Wikimedia

 

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