Ant Group Faces Possible Blacklisting from the U.S.

On the verge of a potential record-breaking IPO, the blacklist won't do much to stop Ant.
Anthony RussoOct 15,2020,14:40

The U.S. State Department has submitted a proposal for Donald Trump’s administration to put the fintech arm of Alibaba Group (NYSE: BABA; HKEX: 09988) on a trade blacklist.

According to a Reuters report Thursday, citing sources, Washington is attempting to place Ant on its so-called “Entity List,” which is designed to restrict U.S. firms from doing business with the Chinese fintech giant. Before exporting specific products to firms on the Entity List, American companies are mandated to acquire a license.

It is not yet clear, however, when the U.S. government agencies will review the matter.

In response to the report, Beijing condemned Washington’s actions, adding more fuel to the Sino-U.S. trade tensions.

“China opposes the U.S. abusing the concept of national security and its national power to oppress foreign countries. This is a bullying practice,” Chinese Foreign Ministry spokesperson Zhao Lijian, said in a daily news briefing Thursday.

He added, “China will continue taking necessary measures to safeguard the legitimate rights and interests of Chinese companies.”

Blacklist Ain't Much of a Problem for Ant

Meanwhile, the potential blacklisting is unlikely to have much impact on Ant Group, as less than 5% of its revenue comes from the U.S.

“The trade blacklist is largely symbolic. It won’t be effective in stopping Ant from either going public or investing in critical areas (i.e. blockchain),” Abishur Prakash, a geopolitical specialist

at the Toronto-headquartered consulting firm Center for Innovating the Future, told CNBC in an email.

Further, “But, the blacklist is effective in another respect: making other countries cautious about linking their tech ecosystems to China.”

Chinese Regulators Delay Ant's Massive IPO

In regards to the IPO, U.S. Senator Marco Rubio in a statement to Reuters last week, called for the Trump administration to attempt to delay it. He got his wish—but not the way he envisioned.

Earlier this week, China’s Securities Regulatory Commission postponed the IPO due to a probe on Ant’s mobile wallet for a possible “conflict of interest.”

Ant, majority-owned by Chinese billionaire Jack Ma, could reportedly raise as much draw as much as $35 billion from the IPO. The massive listing would become the world’s largest, exceeding Saudi Aramco's record-breaking $29.4 billion flotation in January 2020.

The company is planning to dual-list in Hong Kong and in Shanghai on its Nasdaq-like STAR Market. Having recieved the green light from Shanghai, Ant still awaits approval from Hong Kong. The company was forced to delay its hearing with Hong Kong Stock Exchange due to the probe.

If the U.S. moves forward with a blacklisting, Ant would join Chinese tech giant Huawei Technologies, which has been blacklisted from the country since May 2019.

Topics:Ant Group, Jack Ma, Alibaba, Huawei, Trump