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Ant Group’s IPO has been halted. What are the reasons?

Ten days ago (November 3rd), the Shanghai Stock Exchange decided to suspend block Ant Group‘s IPO (Initial Public Offering).
But what is really Ant Group doing, why has it been halted, and what does it mean for the future of doing business in China? Let’s analyze the situation.

Ant Group’s IPO would be the biggest IPO of history

Ant Group is the most valued FinTech company in the whole world, and its IPO was supposed to be the greatest. The reasons behind it are clear: Alipay is used by more than a billion users to make transactions every day. These transactions are used both for B2B and B2C, as well as private transactions between family and friends.
The only competition, until recently (when the Chinese government launched the E-CNY), was Tencent’s WeChatPay, also very common.

Ant Group and Alipay. Source:

Ant Group has a wide business scope, including:
1. Providing electronic payment means by Alipay and others: for example, it tried acquiring Moneygram in 2018. The deal was eventually blocked for National Security Concerns by the US government;
2. Providing balances and statistics for expenses and income of both regular and commercial users;
3. Providing stock and other investment options through Yu’e Bao, often more competitive than Chinese banks;
4. Providing micro-loans to end-users. The size of the loans is based on their credit score (known as Sesame Credit).

The context in which Ant Group’s IPO came out

Understanding the context in which Ant Group’s IPO has been requested is fundamental to understand what happened recently.

– First, in China most of the banks are state banks.
This means foreign interference (or private speculation) is under control and weak, which prevents the destabilization of the Chinese economy.
– Second, Ant Group is in no legal way a bank. It merely acts as man in the middle to give better financial services and other things. But it is still not a bank, nor it wants to be one.
– Third, Ma Yun personally, in the past, advised quite unhealthy spending habits. His advises include taking micro-loans to afford a “better” lifestyle. This equals to say that it is fine to spend the money of others to get yourself a bubble tea or rent a luxurious apartment that you won’t be able to afford with your current salary. Has something like this ever happened anywhere else? Yes, in the USA.

Donald Trump and Robert Kiyosaki, authors of Why We Want You to be Rich. Kiyosaki is a famous entrepreneur and writer. His best seller Rich Dad, Poor Dad explains the difference between liabilities and assets, and points out that debt is always bad. Source:

Most American writers who speak about the tricks to be rich will always point out one single thing to start: do not use credit cards. The first thing you are supposed to do, in order to become rich, is to spend within your income range. The second thing is to get out of debt as soon as possible, or it will eat you alive. Clearly, micro-loans go totally against this logic.
– Fourth, Ma Yun defined the current economic laws of Chinese government too strict and the presence of too many regulations as making it harder to achieve growth. This is the key point.

Is Ma Yun playing with his own money or not?

While the fourth point above may be understandable if taken alone – and that is why Ma Yun has had a considerable support at home and abroad – when considered after the previous three points, it shows that Ma Yun’s move is very dangerous for China. Why?
Because if everything goes well and China grows, it will grow much faster than now. That’s clear.
But if there is something that goes wrong, say an earthquake, a famine, a trade war or a worldwide pandemic, what will support the increasingly (in certain aspects pointlessly) expensive lifestyle of the young generations when the global economy is drowning?
Not Ant Group, for sure, because it is not a bank.
The difficulties will be automatically delegated to the banks that operate in China.
And the majority of the banks are state-held.

The future of FinTech and business in China

Practically speaking, the growth of micro-loaning and the size of Ant Group’s IPO could put the Chinese government in a very difficult spot. The only fact that it can happen will bring two results:
1. Open the door for other companies to follow on Ant Group’s footsteps, increasing the pressure on State Banks as well as the habits of spending on credit. The latter will, as a consequence, make the rich richer, and the poor poorer, because of unhealthy spending habits;
2. Make it much harder to reverse this decision in future, at least without huge repercussions. A step back on such a delicate topic would immediately find the international condemnation of many nations who advocate free trade.
Clearly, the decision of the Chinese government has already had strong consequences on the global image of China.
And yet, it may have been just the right choice for China.

Jack Ma Yun at the World Economic Forum Annual Meeting of the New Champions in Tianjin, China, in 2008. Copyright World Economic Forum ( by Natalie Behring

What we know is that it’s not over yet.
The IPO can still be resumed, as it has been halted for just six months.
Probably by then there will be more strict regulations which can protect the interests of China and the Chinese people.
For other businesses, it only reminds of one thing: Chinese government’s interests match with Chinese people’s interests. And these interests may vary depending on the context. It is not always so simple to understand which interests go first.
In this case, stability and gradual long-term prosperity instead of a short-term explosive growth. While it was possible to forecast such as result, Ant Group’s IPO could have given China a considerable boost in such a troubling year.

Incidentally, Ma Yun, the second richest man of China, is also a member of the Communist Party of China. While it sounds ironic that an entrepreneur can be a Communist Party member, he is not the only one. But his party membership didn’t let things go his own way.
So the last, but not less important, consequence of this event is that the Communist Party of China has clearly shown to be much less rigid and one-sided than the West paint it to be.

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