Ant Group’s IPO Woes Could Slash Valuation In Half To $140B
Ant Group‘s stalled initial public offering (IPO) could cut the company’s valuation in half, with one report putting the firm’s value at just $140 billion. That’s a 50 percent drop from its pre-IPO value of $280 billion, and less than its value when Ant Group raised $14 billion in a 2018 funding round.
Bloomberg cited analysts as saying that increased capital requirements the Chinese government could put on Ant count require substantial funds, cutting the company’s valuation. The FinTech’s IPO could also be delayed by six months, analysts told the news service.
Ant was set to launch a roughly $35 billion IPO earlier this month before Chinese regulators abruptly stepped in. Reportedly, China’s move to suspend Ant’s planned IPO likely came from the top echelon of the Chinese government. Officials in Beijing were reportedly concerned about explosive investor interest in the estimated $37 billion IPO and how it might affect investors and the public markets.
Wang Wenbin, China’s foreign ministry spokesman, said the decision was made to “better maintain the stability of the capital markets and to protect investors’ interests.”
The Chinese government put new regulations in place on Nov. 1. The IPO was then held up by the Shanghai Stock Exchange.
Analysts at Morningstar and elsewhere told Bloomberg that complying with China’s new regulations could cut way into Ant Group’s valuation. That’s because the changes could mean that Ant has to raise lots of capital to back its lending. And the moves could even require the FinTech to seek licenses to operate across China, experts told Bloomberg.
The new valuation also means that the sale of shares could be less profitable in terms of fees paid to investment banks such as China International Capital Corp., Bloomberg reported. It also means that it will be more difficult for billionaire Jack Ma, who founded Ant Group, in his push to acquire other companies.
China-based Ant Group is the financial arm of Ma’s Alibaba Group. In turn, Ant Group is the parent company of Alipay, a wildly popular payments app.