China’s Securities Regulatory Commission (CSRC) has delayed the IPO of fintech giant Ant Group and is probing its mobile wallet for a possible “conflict of interest.”
Ant’s Alipay allows retail investors to purchase into five Chinese mutual funds investing in the IPO, as Reuters reported today, citing people familiar with the matter. The CSRC may find that to be an issue.
Reportedly, more than 10 million retail investors poured money into the funds when they were launched in late September.
Banks and brokerages were sidelined in the process, which is typically the way retail investors purchase into funds. According to Reuters, the CSRC unveiled in guidelines that were effective from the beginning of the month that mutual fund distributors “should avoid conflicts of interest form selling products related to their other existing and potential businesses.”
While the outcome is uncertain, Reuters noted that the probe was not expected to “derail” the IPO. However, Ant was also forced to delay its hearing with the Stock Exchange of Hong Kong.
Ant, which is pursuing a massive dual-listing in Hong Kong and Shanghai's Nasdaq-like STAR Market needs approval from both the CSRC and Hong Kong before the United States presidential election in early November—which could cause uncertainties in the global markets. In September, Ant received the green light from Shanghai.
The news today follows a Monday report from The Wall Street Journal that showed Ant Group raised 60 billion yuan ($8.96 billion) from five mutual funds for its IPO.
The fintech arm of Alibaba Group (NYSE: BABA; HKEX: 09988) could draw as much as $35 billion from its offering. The massive listing would become the world’s largest, exceeding Saudi Aramco's record-breaking $29.4 billion flotation in January 2020.
Ant Group Faces Possible Heat in the U.S.
Meanwhile, the complications from the CSRC isn’t the only headwind Ant Group faces. The Jack Ma-controlled fintech company, along with Chinese tech giant Tencent Holdings (HKEX: 07000; OTC: TCEHY), could potentially face restrictions in the U.S. due to national security concerns over their digital payment systems.
U.S. Senator Marco Rubio told Reuters late last week that the Trump administration should try to postpone Ant’s IPO—and now he got what he wished for; it just wasn’t exactly the way he envisioned it.
“It’s outrageous that Wall Street is rewarding the Chinese Communist Party’s blatant crackdown on Hong Kong’s freedom and autonomy by orchestrating Ant Group’s IPO on the Hong Kong and Shanghai stock exchanges,” the republican senator said in a statement to Reuters.
It’s unclear if Trump will go on to ban Alipay the same way he attempted to ban TikTok and WeChat—the court decisions on those cases in favor of the Chinese platforms may or may not help Alipay escape the fate.
Less than 5% of Ant’s revenues come from the U.S., according to CNN.