Business and Finance

Power Play: Beijing Slams the Brakes on Jack Ma’s Huge IPO

Image Credit: CGTN News

The stunning move by China’s government to suspend the Ant Group IPO last week, observers contend, means to send a clear message to the country’s tech tycoons about who’s really in charge.

Regulators in China shocked investors and markets around the world when they abruptly pulled the plug last week on the highly anticipated initial public offering (IPO) of Ant Group, shutting down what was set to be the biggest share sale in history, with billionaire tycoon Jack Ma’s latest venture expected to raise some US$34-37 billion.

Billionaire entrepreneur Jack Ma delivers an address earlier in 2020 | Image Credit: Business Upturn

The Shanghai Stock Exchange disclosed in its statement that it had postponed the Ant Group IPO because of “major issues” that had the potential of causing the company “not to meet the listing conditions or disclosure requirements.” The announcement was made a day after the Chinese central bank and other Chinese government authorities summoned Ma and a number of other Ant Group executives for discussion.

At this time, it remains unclear when or indeed even if the Ant Group IPO will be resumed. The company issued a statement in the days following the shutdown, saying it would remain in “close communications” with Chinese regulators and the Shanghai Stock Exchange.

The market reaction to Beijing’s interference was swift | Image Credit: Al Jazeera

Observers contend, however, that the intervention, which is unprecedented and rocked the investment world, was all but certainly meant to serve as a warning shot to Chinese tycoons harbouring outsize ambitions. The unambiguous message from China’s central government: “We run the show here, not you.”

It’s possible that the tightening of regulations on tech giants in China is a sign of lessons learned by watching US counterparts like Google, Facebook, Amazon, and Twitter having increased – and often disruptive – influence in the American political landscape. Beijing recently released a strict set of guidelines dictating the need for companies which are “politically sensible” and which will firmly toe the line set by the country’s ruling Communist Party.

The market reaction to China’s smackdown was immediate and significant. Shares in one of Ma’s most well-known ventures, Alibaba, the e-commerce giant he co-founded, plunged 8% following the Ant Group IPO news, wiping out US$68 billion in market value. Meanwhile, analysts have estimated that Ant Group’s valuation could be slashed by as much as US$150 billion in the wake of their IPO being scuppered. (Some experts have predicted a hit closer to US$190 billion.)

As reported by CNN Business, “There’s a saying in China: ‘The tallest nail gets hammered down,'” said Duncan Clark, author of Alibaba: The House that Jack Ma Built and founder of investment advisory firm BDA China. And with very little question, Clark added, it certainly looks Ma just got hammered by the Chinese government.




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