© Reuters. FILE PHOTO: Signs of Ant Group seen during the World Internet Conference in Wuzhen
By Ross Kerber and John McCrank
BOSTON / NEW YORK (Reuters) – China’s regulatory reorganization of Jack Ma’s Ant Group, turning hot fintech into a holding firm, seems to have diminished the appetite of some Investor in any resurgence scheme used to be the world’s largest IPO.
Overhaul took place two days after bonding Alibaba (NYSE 🙂 Group Holding Ltd, which owns about a third of a stake in Ant, was fined a record $ 2.75 billion antitrust as China tightened control over its internet giants. surname.
Some investors based in Hong Kong and the United States as well as others who follow the Chinese market, said these developments appear to limit Ant’s outlook, reducing profitability and valuing. expected by Ant.
“I think there are still a lot of questions about what a post-restructuring ant looks like,” said Daniel Kern, chief investment officer at TFC Financial Management in Boston.
Alibaba’s New York-listed shares rose 9.2% on Monday and Hong Kong shares rose 3% on Tuesday as investors viewed these steps as removing the primary source of uncertainty for firm and bail them no worse.
Last year, Ant’s valuation was offered at $ 315 billion for its IPO, which came just before its November listing in Shanghai and Hong Kong.
Even before news of the reform came, sources told Reuters some global investors had valued Ant around $ 200 billion based on its 2020 operating results.
Leland Miller, CEO of US-based consulting firm China Beige Book, was among those who expected Ant’s IPO plan to be revived at some point, but said he doubt the authorities are in a hurry.
A Hong Kong-based investor whose investment in Ant’s 2020 IPO was refunded, expected their listing to take place in a few years.
Ant declined to comment on its IPO plans and possible changes in pricing.
“ Ant as an IPO bank or finance company is a different investment thesis, ” said William Huston, founder and director of institutional services at the independent investment consulting firm Bay Street Capital Holdings. Ant as a fintech company.
Huston reduced the company’s position in Alibaba last year from 8% of its portfolio to less than 1%.
“Initially we took the position early and thought Ant would eventually go public,” Huston said. “It’s a substantial opportunity now. There’s no rush to jump in investing in a bank.”
‘VALUE KNOWLEDGE DESIGN’
TFC’s Kern said that while Ant could have been more profitable under its previous structure in which it helped banks with consumer lending, its role could also pose greater risk to Economy and regulators were right to step in.
Now, the new rules appear to restrain Ant and competitors, said Kevin Carter, founder of the Internet ETF & Emerging Markets eCommerce Fund.
“Without a doubt, a kind of significant impact on the value of all those businesses has happened,” Carter said, although he added that they all have good long-term potential. .
Not all investors are so cautious.
Ant is seen by many as the focus of Chinese officials, said Dan Hanson, chief investment officer at Ivy Investments.
“However, this restructuring seems difficult, in the end it makes it possible for Ant to invest more. The regulatory oversight of Ant is a big part, and the deal seems to be on hold. Stop it, “he said.
Started as Alibaba’s payments arm, Ant’s businesses now include asset management and consumer lending, and its Alipay application processes more transactions a year than Mastercard (NYSE: ) or Visa (NYSE :).
Alibaba was seen as a tech company in 2018 when it raised capital from investors including Warburg Pincus and Carlyle Group (NASDAQ 🙂 Inc. Those private equity firms were not immediately available to comment.
“It is quite clear now that fintech cannot be technology without financial regulations,” said Liqian Ren, a quantitative investment expert at WisdomTree Asset Management.
Besides the reforms, some investors are also concerned about the higher level of capital Ant will need to hold as a finance company, and its impact on pricing.
Sam Lecornu, CEO of Stonehorn Global Partners (NYSE :), based in Hong Kong, said: “An additional capital requirement reduces return on equity and asset potential. .. and also invested in Ant’s IPO. “But does not take away the particular background inherent.”