The IPO of Ant Group, the world's most valuable unicorn- or billion-dollar unlisted tech firm- was all set for a $37 billion dual listing in Hong Kong and Shanghai's STAR Market in the first week of November until news of a halt in its listing process hit the market just 48 hours before its trading debut on both stock exchanges. 

Simultaneous listing of Ant Group, the financial service arm of the e-commerce giant Alibaba, could have been the world's largest IPO. It would have surpassed the record set by oil giant Saudi Aramco's $29.4 billion float last December. The company could have been worth more than many global banks after its share sale. So what turn of events lead to the suspension of the massive size IPO?

In 2003, Jack Ma, co-founder of Alibaba created a service called Alipay. It helped e-commerce take off. Under his leadership, he spun the service out in 2011 as a separate entity- Ant Group, setting off a tiff with Yahoo, which was then a major Alibaba investor. 

Alipay became the largest player in China's $62 trillion third-party mobile payments market. It has more than 730 million monthly users, more than twice the population of the United States. Ant says its systems processed 459,000 payments a second at the peak of a Chinese shopping holiday in 2019 whereas Visa, by contrast, says it can handle 65,000 transactions a second. Its wide range of functions include facilitating payments, granting loans, providing opportunities for investment and insurance, selling financial technology to enterprises, and much more.

Despite being a fintech giant, the Shanghai stock exchange suspended the group’s IPO just 2 days before its trading debut, following which the company decided to halt the Hong Kong listing as well. The former stock exchange in a notice to the organisation stated that the company did not meet the “perquisites” owing to the changes in financial technology regulatory requirements. 

The news sent shock waves through the financial world, and other Chinese tech companies looking to raise capital. For months now, overseas exchanges have grown increasingly hostile towards Chinese firms, and exchanges within their home turf have offered solace. Retail investors alone bid a record of $3 trillion worth of institution’s shares in its twofold listing. However, this event is also a reminder of the challenges in their home country.   

It is believed that such scrutiny from regulators was to ensure the nation's financial stability and other related factors like privacy which is a concern all over the world. The fintech industry lies in a grey area, with not many regulations. The authorities were concerned about the increasing size and dominance of the company, and its possibility to jeopardize the country’s financial structure.  

Chinese foreign ministry spokesman Wang Wenbin said, “The decision (of suspension of the IPO) is made by relevant exchange institutes based on laws to better safeguard capital market stability and protect investor rights and interests”.

The loan segment forms a significant proportion of Alipay’s business model where most of the credit risk is taken by banks, and hence the authorities were sceptical of this lending as it was done by an institution other than a bank. Hence, they wanted more involvement from the firm in the process and altered the requirement of maintaining capital reserve from 1% to almost 30%, which could effectively affect the group’s revenue stream.

2 weeks prior to the listing, China’s richest man, Jack Ma, who also is the largest shareholder of the fintech company made certain critical remarks about the regulatory framework not supporting fintech companies enough. Many also see it as a punishment for being so vocal. 

The Chinese government has always been a major participant in all aspects of the functioning of the nation. For years, the leadership has sought to facilitate the growth of its tech giants. Its internet restrictions also referred to as the 'Great Firewall', homegrown tech has been protected from foreign competitors and thus dominate the domestic market.

Take, for instance, WeChat- the country’s alternative to social media sites like Facebook and Twitter.

However, this advantage to domestic firms comes at a cost, where they must never outgrow the regime’s grasp. The system has various measures to keep businesses in-check, such as the introduction of new laws and restrictions that it can impose on a whim.

In 2017, Tencent drew Beijing's ire after its Honor of Kings gaming app was said to be too addictive and a few days later the government imposed sweeping reforms on the nations’ mobile gaming industry that included content and playing time restrictions. The most recent example could be the sudden imposition of restrictions on exporting ‘Artificial Intelligence’ technology, which immediately affected ByteDance’s sale procedure to comply with the US’s threat to ban TikTok.  

This instance with Ant Group should not be seen in isolation and more of such interferences could be expected in the future for tech firms. This could be a hurdle at a time when China faces extreme scrutiny over data privacy issues and aversion for coronavirus.