A couple of readers have reached out to ask for my views on the delay of the Ant IPO, and I figured I would make this Patron post public given the interest.
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2 big things that happened in the past 24 hours – (1) Ant IPO was postponed, and (2) the Election Race is much closer than expected (in line with what we discussed yesterday on Patron).
What I’m hearing from the grapevine, is that:
- This move may have been planned in advance by the CCP.
- Under this view, Jack Ma’s talk about excessive regulation last week was not the catalyst that caused the lockdown, but it was the response to CCP’s planned actions – rumour is that he already knew about this crackdown last week.
- The speed of the crackdown (over the past 24 hours) is unusually fast even for China, and seems to indicate that it was premeditated.
Of course, do take this with a pinch of salt since they are unconfirmed.
That said, my gut feel is that this narrative makes a lot of sense.
We don’t know the full objectives in play here, but we never know with China.
Possible reasons are:
- To show Jack Ma who’s boss (ties in with them forcing him to step down previously),
- To reassert control over entrepreneurs (and businesses) in China,
- To regulate the Fintech industry (ensure they are in line with banks) etc.
What I do know, is that in China there’s usually more than meets the eye. China Officials don’t think in the same way that we in Singapore (or in the West) do.
Whatever the case, early signs are not promising, and it looks like they will have to pull this IPO entirely.
This could have broader implications for both Tencent and Alibaba, since both are heavily involved in the FinTech space with WeChat Pay and Alipay respectively (more so for Alibaba). The broader implications on the business will only come to light going forward – when the range of regulatory measures are revealed.
Update: Developments since then do indicate that this IPO is likely to be pulled entirely for now, as there is talk about refunding retail investors. If the regulatory measures talked about are implemented (requiring 30% capital for lending – up from the current 2%), this would cripple Ant’s current business model (they make a bulk of their money from lending currently).
It will bring Ant far more in line with a traditional bank. And this will require Ant to restructure the business significantly before going for an IPO again – which might mean we won’t see this come back for a while. Interesting stuff.
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