The highly-anticipated Ant Group IPO had been primed to break the record for the world’s biggest-ever initial public offering last November. But now the tech giant, co-founded by billionaire Jack Ma (pictured above), is being forced to restructure. It looks set to create a credit-sharing company that would see it share its customer data, following concerted pressure from the People’s Bank of China (PBoC).
China’s central bank is aiming to stop excessive data collection and overhaul consumers’ privacy protection. Ant Group, owner of China’s largest digital payments platform, Alipay – which serves over one billion users – had resisted pressure from financial regulators to share its data. However, in April, announced it would restructure into a financial holding company overseen by the PBoC.
Number of Alipay users
Jack Ma’s plans thwarted after Ant Group IPO halted
Last November’s Ant Group IPO was about to raise a world record $34.5bn with a dual listing in Shanghai and Hong Kong, before its sudden late suspension, which Ant Group said at the time was due to “changes in [the] financial technology regulatory environment”. Alibaba [BABA], also co-founded by Jack Ma and which owns around 33% of Ant Group, saw its Hong Kong-listed shares slide 7.54% during trading after the announcement, while Alibaba’s share price on the New York Stock Exchange closed down 8.13%.
Some market commentators linked previous comments made by Jack Ma to the late halting of Ant Group’s IPO The billionaire owner had said: “Today’s financial system is the legacy of the industrial age… we must set up a new one for the next generation and young people. We must reform the current system.”
“Today’s financial system is the legacy of the industrial age … we must set up a new one for the next generation and young people. We must reform the current system” - Jack Ma
Ant Group’s restructure
In April, it was revealed that Jack Ma’s Ant Group would restructure as a financial holding company, and last week, The Wall Street Journal revealed that the company is in talks with Chinese state-owned enterprises to create a credit-scoring company that will effectively be overseen by regulators. In April, Alibaba received a $2.75bn antitrust penalty, in a further sign of tightening regulation in China.
The PBoC said a “comprehensive and feasible restructuring plan” would cut the “improper” links between Alipay, its virtual credit card business Jiebei and consumer loan unit Huabei, according to CNBC. Central to the enforced changes is the vast amount of consumer data that Ant Group holds, of which the PBoC called a “monopoly on information”. The central bank said Ant Group had consented to “rectify illegal financial activities in credit, insurance and wealth management.”
Valuation of Alibaba's antitrust penalty
Ant Group to launch credit-scoring business
Ant Group and other fintech companies have accumulated a huge volume of data on individuals over the last 10 years, as fintech has exploded in the country. This information has essentially been kept in-house for when regulators believe it should be used to help China create a robust national credit-scoring system. As a consequence, Ant Group and Chinese state-owned companies are now set to form a credit-scoring company, with the joint venture potentially being established in the third quarter of this year. Ant Group is likely to relinquish some control over its data on individuals who use the Alipay app to spend, borrow or invest their cash.
Chinese regulators want state-owned shareholders to have a say in how the new company operates, the data collected and how the credit scores it produces would fit into China’s plans to build a nationwide credit-scoring database, according to The Wall Street Journal.
Ant Group had previously planned to provide credit scores for most of China’s population, under its own brand, Zhima Credit, which it started six years ago. However, those plans are consigned to the dustbin after the intervention of the Chinese regulator, and it’s now been turned into a loyalty programme for Alipay users. There’s little doubt that none of this is what Jack Ma had planned, and it seems that Ant Group’s IPO has not moved any nearer to fruition since its postponement last November.