INSUBCONTINENT EXCLUSIVE:
The mid-level bureaucrats left China's richest man waiting as they prepared for a meeting that would send shockwaves across the financial
world.It was Monday morning in Beijing, and Jack Ma had been summoned to the China Securities Regulatory Commission just days before he was
public in the biggest stock-market debut of all time.When the regulatory officials finally entered the room where Ma was waiting, they
skipped over pleasantries and delivered an ominous message: Ant's days of relaxed government oversight and minimal capital requirements were
The meeting ended without a discussion of Ant's IPO, but it was a sign that things might not go as planned.The subsequent unraveling of the
$35 billion share sale has thrust Ma's fintech giant into turmoil, offering a stark reminder that even China's most celebrated businessman
isn't immune to the whims of a Communist Party that under Xi Jinping has steadily tightened its grip on the world's second-largest
economy.Among the questions that linger as international investors try to make sense of a chaotic 72 hours: Why would China scuttle Ant's
IPO at the last minute after months of meticulous preparation? And what does the future hold for one of the country's most important
companies?Interviews with regulators, bankers and Ant executives offer some answers, though even insiders say only China's top leaders can
be confident of what happens next
Most of the people who spoke for this story did so on the condition of anonymity to discuss sensitive matters.Ma's meeting in Beijing on
Monday triggered a behind-the-scenes scramble by Ant and its bankers for more clarity from Chinese regulators
While CSRC officials signaled at the time they weren't aware of any changes to the IPO plans, the regulator's cryptic social media post
later that day about a "supervisory interview" with Ma set tongues wagging from Hong Kong to New York.By Tuesday afternoon, the mood had
worsened as whispers of a delay began circulating in Shanghai
At around 8 p.m., the city's stock exchange called Ant to say the IPO would be suspended.When the official statement landed less than an
hour later, it cited a "significant change" in the regulatory environment but offered few additional details on why authorities would
scupper the listing two days before shares were expected to start trading.At a hastily arranged meeting between Ant's bankers and the CSRC
later that evening, officials pointed to the company's need for more capital and new licenses to comply with a spate of regulations for
financial conglomerates that had begun taking effect at the start of November
There was no discussion of how quickly the IPO could be restarted.An Ant spokesman said the need for more capital and new licenses wasn't
discussed in the meeting but declined to provide more details.One concern among regulators was that the stricter rules may not have been
fully disclosed in Ant's prospectus
On top of the new financial conglomerate regulations, the government had on Monday released stringent draft rules for consumer loans that
would require Ant to provide at least 30% of the funding for loans it underwrites for banks and other financial institutions
Ant currently funds just 2% of its loans, with the rest taken up by third parties or packaged as securities.Several officials said it was
better to stop the listing at the 11th hour than to let it proceed and expose investors to potential losses.That sentiment was shared by at
least one institutional money manager, who said he had practically begged an Ant executive for an IPO allocation during a meeting at the
Mandarin Oriental hotel in Hong Kong
Now that he has a clearer idea of the regulatory risks, he's relieved the share sale was shelved.The CSRC said in a statement on Wednesday
that preventing a "hasty" listing of Ant in a changing regulatory environment was a responsible move for the market and investors.Still,
some China watchers have an alternative theory for why Xi's government acted the way it did: it wanted to send a message.Ma, a former
teacher who's widely revered in China, faced an unusual amount of criticism in state media after he slammed the country's financial rules
for stifling innovation at a conference in Shanghai on Oct
His remarks came after Vice President Wang Qishan -- a Xi confidante -- called for a balance between innovation and strong regulations to
prevent financial risks."It appeared that, intentionally or not, Ma was openly defying and criticizing the Chinese government's approach to
financial regulation," Andrew Batson, China research director at Gavekal Research, wrote in a report.The weekend before Ma was summoned to
Beijing, the Financial Stability and Development Committee led by Vice Premier Liu He stressed the need for fintech firms to be regulated.In
one sign authorities may keep up the pressure on Ant, people familiar with the matter said on Wednesday that regulators plan to discourage
banks from using the fintech firm's online lending platforms
The directive strikes at the heart of Ant's commission-based lending model, which generated about 29 billion yuan ($4.4 billion) of revenue
in the six months ended June.Any suggestion that banks will stop using its platforms is unsubstantiated, Ant said in a response to questions
from Bloomberg.Some investors are bracing for tougher times at both Ant and the rest of Ma's business empire
Shares of Alibaba Group Holding Ltd., which owns about a third of Ant, tumbled more than 8% on Tuesday in New York for the steepest drop in
The slump cut Ma's wealth by almost $3 billion to $58 billion, dragging him down to No
2 on China's rich list behind Tencent Holdings Ltd.'s Pony Ma.The IPO debacle has also raised broader concerns about China's commitment to
transparency as it tries to lure international investors.On Tuesday, confusion over the suspension triggered a flood of calls to Ant's
bankers from baffled money managers
The sense of whiplash in some cases was stark: Just an hour or two before the suspension was announced, Ant's investor relations team was
still trying to confirm attendance at a post-IPO gala in Hong Kong
One of the company's biggest foreign investors predicted the episode could do lasting damage to confidence in China's capital markets.It may
also have spillover effects on Hong Kong, whose status as a premier financial hub has already come under question amid increased meddling
Nearly a fifth of the city's population by one estimate had signed up to buy Ant shares; many who had planned on a windfall were instead
stuck paying interest expenses on useless margin loans."The lack of transparency reminds us that the 'Chinese way' remains fraught with
issues," said Fraser Howie, author of "Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise."As for Ant itself,
it's unlikely that the IPO suspension will deal a fatal blow
The company had 71 billion yuan of cash and equivalents as of June and is one of China's most systemically important institutions
The last thing authorities want is a destabilizing loss of confidence in a business that plays a key role in the nation's financial
plumbing.The more pertinent risk for Ant is a decline in its breakneck pace of growth and lofty valuation
China's new regulations will force the company to act more like a traditional lender and less like an asset-light provider of technology
services to the financial industry
That will almost certainly mean a lower price-earnings ratio for the stock if it eventually lists.Also looming is the introduction of
China's central bank digital currency, which threatens to erode Ant's dominance in payments
That could have implications for the company's other businesses as well
Ant's credit platform, for instance, utilizes its huge trove of payments data to assess the financial strength of borrowers who often lack
collateral or formal credit histories.All of that will be bad news for shareholders who propelled Ant's valuation to $315 billion -- higher
than that of JPMorgan Chase - Co
But it may suit regulators and party leaders who worry that Ma's creation has grown too big, too fast.(Except for the headline, this story
has not been edited by TheIndianSubcontinent staff and is published from a syndicated feed.)
