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Ant Group’s valuation could be slashed by over $150 billion after suspended IPO

Chinese financial technology giant Ant Group, which was gearing up for the world’s biggest IPO, could see its valuation come crashing down after its public listing was suspended, experts said.To get more latest technology news, you can visit shine news official website.

It comes as Beijing announced there will be proposed regulations on micro-lending — a move that could force Ant Group to hold more capital, and make the company look a bit more like a bank rather than a technology company, the experts told CNBC.

“The biggest risk for Ant will be shifting from a fintech to a capital intensive regulated bank and not losing its competitive connection with consumers,” Eric Schiffer, CEO of private equity firm The Patriarch Organization, told CNBC by email.

“The proposed regulation decimates Ant’s valuation to more than 1/2 taking it under $150 billion.”

Ant Group, which is a third owned by e-commerce giant Alibaba and controlled by founder Jack Ma, was set to start trading on Nov. 5 in Shanghai and Hong Kong. The initial public listing would have raised just under $34.5 billion — setting a new world record, and valued it at $313 billion.

But two days before that listing, the Shanghai Stock Exchange said it was suspending the IPO and that Ant Group reported “significant issues such as the changes in financial technology regulatory environment.”

The shock move came after Ma appeared to criticize Chinese regulators and after he and two other other top Ant Group executives were called into a meeting with regulators three days before the listing.Chinese regulators also released draft rules for the micro-lending sector in China last week, which could directly impact Ant Group’s business. The company’s biggest revenue driver is what it calls “CreditTech.”

Ant Group offers loans which are independently underwritten by the company’s partner financial institutions, which includes around 100 banks.The Chinese giant says that around 98% of credit balance originated through its platform as of June 30 2020, were by its partner financial institutions or securitized.

That allows Ant Group to tout itself as a capital-light business.But Beijing has proposed a joint lending model where internet platforms should fund no less than 30% of total loans. That appears to be the most significant point of the regulator’s draft proposals.