Your Investment News From China to Wall Street

Pressured by Regulators, Ant Financial Delays IPO Again

The Chinese FinTech unicorn, valued at $150 billion, has pushed back its IPO for a second time, following increased government regulations on private financial firms.

Anna Vodopyanova
    Aug 21, 2018 9:25 AM  PT
Pressured by Regulators, Ant Financial Delays IPO Again

Chinese FinTech unicorn Ant Financial has again pushed back its initial public offering plans after Beijing recently imposed new regulations on private financial institutions.

In a June fundraising, the valuation of the firm spun off from Alibaba Group Holding Ltd. (NYSE: BABA) topped $150 billion after Ant closed a $14-billion funding from global investors. The unicorn's IPO, possibly split between Hong Kong and mainland China, was expected to follow.

In a recent turnaround, however, Ant has delayed its IPO to next year, as reported by Financial Times, citing sources familiar with the matter.

The firm has been best known for Alipay, an online payments app that has been dominant in China, leading so far in a fierce competition against a financial service of another conglomerate, Tencent Holdings Ltd.  

Ant's becoming a crucial part of China's massive and vulnerable financial system has concerned regulators who want to make sure that the growing private financial firms do not pose systemic problems to the Chinese economy.

The People's Bank of China has singled out Ant as the only online finance firm for a trial program to test stricter regulations on financial holding conglomerates, according to a Reuters report.

Pressured by the central bank, Ant Financial's subsidiary Sesame Credit stopped issuing individual credit ratings. At the same time, Alipay had to comply with the bank's recent decision to raise the reserve funds ratio of third-party payment firms to 50 percent, with the expectation that the ratio could be raised to 100 percent. In addition, Ant's micro-lending business suffered under new regulations on key funding sources like asset-backed securitization, leading it to look for loan-issuing partnerships with traditional banks.

Early in June, the unicorn was shifting its core services from finance to technology to offset increasing regulatory pressure. If the company's transition goes as planned, by 2023, tech services would make up 65 percent of Ant's revenue compared with 34 percent in 2017.

Among the investors in Ant's June fundraising were Singapore-based sovereign funds GIC Pte Ltd. and Temasek Holdings (Private) Ltd., Malaysian sovereign fund Khazanah Nasional Berhad, Canada Pension Plan Investment Board, and U.S. private equity firms Warburg Pincus LLC, Silver Lake, and General Atlantic. More than $10 billion was generated from the U.S.

Alibaba holds a 33 percent equity stake in Ant Financial. Ant's earnings for the first quarter showed a net loss, which Alibaba, in a May statement, attributed to aggressive investment in its business, specifically, in marketing and promotion for user acquisition. Alibaba said that Alipay, together with its financial partners, has served 870 million users globally during the fiscal year ended March 31.

(Reuters contributed to this article)