EXCLUSIVE-Beijing offers prior approval for the resurrection of Ant’s IPO after a harsh crackdown

EXCLUSIVE-Beijing offers prior approval for the resurrection of Ant's IPO after a harsh crackdown

According to two persons familiar with the subject, China’s central leadership has granted billionaire Jack Ma’s Ant Group a tentative green light to resuscitate its initial public offering (IPO), the clearest evidence yet that Beijing is loosening its grip on the Internet sector. Ant, a subsidiary of Chinese e-commerce juggernaut Alibaba Group Holding Ltd, plans to file a preliminary prospectus for the share offering as early as next month, according to the people, who declined to be identified owing to the delicacy of the topic. According to one of the individuals, the fintech behemoth would have to wait for direction from the China Securities Regulatory Commission (CSRC) on the particular timing of the prospectus filing.

“Under the guidance of regulators, we are focused on steadily moving forward with our rectification work and do not have any plan to initiate an IPO,” Ant said on its WeChat account late on Thursday. Neither the CSRC nor China’s State Council Information Office, which handles media queries for central leaders, responded to Reuters’ request for comment.

In a publicly released statement, Ant said there was no plan to relaunch its IPO, without elaborating. It did not respond to Reuters request for comment on whether it had received a green light from Beijing. The company’s stock market listing was hastily shelved at the behest of Beijing in November 2020. At the time, it was slated to be valued at around $315 billion and planned to raise $37 billion, which would have been a world record.

Chinese authorities pulled the plug on the IPO and cracked down on Ma’s business empire after he gave a speech in Shanghai in October 2020 accusing financial watchdogs of stifling innovation. The IPO’s derailment marked the start of a regulatory crackdown to rein in China’s huge homegrown technology sector, which spread to other industries, including property and private education, wiping billions off market capitalisations and triggering layoffs at some firms.

Any data out of China lately has been dreadful because of lockdowns and the last thing they want to do is compound that issue. In the next three to six months we are likely to see China’s crackdown unwound,” said David Madden, market analyst at Equiti Capital in London. A revival of the IPO may also mark a rehabilitation of sorts for Ma, who has been maintaining a low public profile since Beijing swooped. EASING EFFORTS

With its economy slowing in a politically sensitive year when Xi Jinping is expected to secure an unprecedented third term as president, Beijing is looking to loosen it grip on private businesses including tech giants to help it meet a growth target of 5.5%, something economists have said will be hard to reach given COVID-19 lockdowns. “They are rolling back on their crackdown to counterbalance the lockdown they’ve had.

Chinese Vice-Premier Liu He last month told tech executives the government supported the development of the sector and will back firms pursuing listings at home and abroad. In another sign of Beijing’s softer stance, China’s ride-hailer Didi Global, which has been under a cybersecurity probe since last year, is in advanced talks to buy a third of a state-backed electric-vehicle maker, Reuters reported on Wednesday.

News of the talks comes after the Wall Street Journal reported on Monday that Chinese regulators are set to conclude their investigations into Didi, which could offer more hope to investors about its recovery. Bloomberg reported earlier on Thursday that Chinese financial regulators had started early stage talks on a potential revival of Ant’s stock market debut, without mentioning a timeline.

The regulator had established a team to reassess the share sale plans. The CSRC later said in a statement it had not conducted any assessment or research work regarding an Ant IPO. The U.S. listed shares of Alibaba, which owns nearly one-third of Ant, were down 4% after earlier rising as much as 7% in pre-market trading on the Bloomberg report. U.S. private equity firm Warburg Pincus, a big investor in Ant’s 2018 private fundraising, lowered its valuation of Ant to about $180 billion at end-March from $221 billion one year earlier, a separate source said. The regulatory clampdown meant Ant was restructured as a financial rather than tech firm and the financial sector typically carries lower valuations, sources and analysts said. Warburg Pincus declined to comment on Thursday.

“The size of Ant and the IPO will have to be smaller than what was planned in 2020 because the market conditions have changed and cannot be compared to now,” said Dickie Wong, executive director of Kingston Securities in Hong Kong. U.S.-listed shares of Chinese tech and e-commerce firms have gained this week on hints Beijing’s one-and-a-half year long crackdown may be easing, with both ride-hailing firm Didi and Alibaba up by a third each.

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