Chinese Big Tech Value Plummets $280B Amid Regulatory Issues
Big technology firms in China are suffering as regulatory issues continue, triggering falling share prices, according to a CNBC report on Wednesday (Nov. 11).
Hong Kong shares of Alibaba dropped 9.8 percent; Tencent declined 7.39 percent; Smartphone maker Xiaomi dropped 8.18 percent; on-demand delivery services firm Meituan Dianping fell 9.67 percent; and eCommerce giant JD.com plummeted 9.2 percent.
The broader Hang Seng Tech index also dropped 6.23 percent on Wednesday to 7,465.44, the news outlet reported.
“The combined losses of the five tech heavyweights since their Monday’s close has contributed to more than $280 billion being wiped off in terms of market cap at the close of the trading day in Hong Kong,” according to CNBC’s calculations.
The State Administration for Market Regulation — China’s regulator — said on Tuesday (Nov. 10) that it was issuing draft rules to put a stop to the “monopolistic behavior” on digital platforms.
The news sent Alibaba shares down more than 7 percent. Alibaba has about a 33 percent stake in Ant Group.
The decree from Chinese regulators followed the suspension of Ant’s initial public offering (IPO) in Shanghai and Hong Kong. Last Monday (Nov. 2), China’s central bank and regulators outlined new rules for digital micro-lending.
Ant was looking for the IPO — tracking to be the world’s largest — to raise just under $34.5 billion in what would have been the world’s biggest IPO.
“You don’t yank a $35 billion IPO two days before it’s going to be launched internationally, it makes the regulatory system look completely arbitrary and also confused,” Andrew Collier, managing director at Orient Capital Research, told CNBC.
“It suggests deep politics within China … that’s bubbled to the surface and they couldn’t resolve (it) ahead of time,” Collier said. “Regulation can be positive but this particular move was a disaster.”
Ant’s suspended IPO could decimate the company’s valuation by as much as $140 billion, a 50 percent drop from its pre-IPO value of $280 billion. It is also lower than Ant Group’s valuation in a 2018 funding round of $14 billion.
The draft rules handed down from China’s State Administration for Market Regulation (SAMR) aim to increase competition among tech platforms. In particular, the regulator wants to stop the practice of brands being prevented from selling on more than one platform.