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Ant Group: How the Largest IPO in History Came to a Halt

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Ant Group (螞蟻集團) was on course to raise HKD273bn in a dual offering on the Hong Kong Stock Exchange (SEHK) and the Shanghai Stock Exchange’s (SSE) STAR Market. Pre-IPO, Ant’s value as a fintech was estimated at HKD2.43tn. As investors were subscribing en masse, China’s central bank and finance regulators published a new draft legislation to regulate “micro-lending business operated by internet.” What would have been the largest IPO in history was cancelled just two days before its scheduled listing on 5 November 2020.

Ant spun off from its parent, Alibaba. It owns Alipay, one of the two largest digital payment systems in China. Ant diversified into a fintech business that included lending, wealth management, and insurance business lines among others. Ant’s lucrative lending business, explosive growth, and business model disrupted the Chinese traditional finance industry. After the new legislation came into effect, Ant’s capital reserve ratio for its CreditTech business would have to increase from the current 2% to 30%. This was expected to impact the size and growth of its lending business and therefore its value. 

Learning Objective:

After being taught the case students will be able to:

1. understand Ant’s business development from digital payment to lending and other digital platform businesses;

2. grasp the business model used by Ant in its lending business, as well as appreciate the business risks brought to the banking industry and the impact of regulations on its valuation;

3. understand the accounting methods used by Ant for its lending business;

4. Use different methods to come up with the valuation  of Ant as a digital platform and as a financial institution.

Year of Publication: 2021
Ref. No.: 21/688C
Discipline: Finance & Investments
Industry: Banks & Diversified Financials
Country: China (People's Rep. of)
Company: Ant Group
Languages: English
Pages of Text: 8