The subscription amount was 20 trillion yuan, 870 times more than the issuance of stocks… The “miracle” Ma Yun called “the largest listing in the history of mankind” was “suspended” by an announcement by the Shanghai Stock Exchange. Everything happened in the evening two days before the listing. On the evening of November 3, Ant Group received a notice from the Shanghai Stock Exchange (hereinafter referred to as the “Shanghai Stock Exchange”) to suspend its A-share listing plan on the Shanghai Stock Exchange. Affected by this, Ant’s plan to simultaneously list H shares on the Hong Kong Stock Exchange will also be suspended.
In late July this year, Ant Group announced the launch of its listing plan; in late October, the China Securities Regulatory Commission approved the registration of Ant Group’s IPO on the Science and Technology Innovation Board. It took only three months for Ant Group to sprint from the start of listing to getting approval. time.
Two days before the bell struck, he was told to suspend.
The reason given by the Shanghai Stock Exchange is, “Recently, it happened that your company’s actual controller, chairman and general manager were jointly conducted supervision interviews by relevant authorities, and your company also reported changes in the financial technology regulatory environment and other major issues. This is a major issue. Events may cause your company to fail to meet the issuance and listing conditions or information disclosure requirements.”
After that, Ant Group issued a letter “To Investors” on the official WeChat, stating: “Ant Group apologizes for the trouble this has caused investors. We will properly handle the follow-up in accordance with the relevant rules of the two exchanges. jobs.”
From the regulatory night on November 2 to the suspension of its listing plan the next day, the technology giant, which is expected to become the world’s largest IPO, is experiencing unprecedented ups and downs, and it has also given countless investors with wealth dreams a “roller coaster.”
A week ago, according to the IPO price, Ant Group’s A+H share issuance raised up to 260 billion yuan (including the initial issuance of new shares and the full exercise of the over-allotment option).
With the suspension of the listing plan, 260 billion fund-raising has been suspended.
On the morning of November 4th, Ant Group took the lead in the Hong Kong Stock Exchange to announce the refund plan for the application funds for the Hong Kong public offering, the application funds for the Hong Kong public offering (together with 1.0% brokerage commission, 0.0027% Hong Kong Securities Regulatory Commission transaction levy and 0.005 % Hong Kong Stock Exchange transaction fee) will be refunded in two batches without interest. In addition, A-share investors are also waiting for a refund plan.
“For the five funds that participated in the Ant Group’s strategic placement before, the funds participating in the Ant Group’s IPO subscription will be returned to the fund account for additional investment, and the strategic placement fund will still operate normally.” A senior executive of a fund company told a reporter from Caijing that he believed that, On the premise that the (New Small Loan Regulations) document is issued, this is already a relatively good result, otherwise there is a risk of falling below the issue price after the listing. “
“From the current point of view, Ant listing should need to re-adjust the listed business and re-valuation.” A securities overseas analyst told Caijing reporter that personally think that the short-term is bad but the long-term is good. What is certain is that the ant prospectus Will be disclosed in more detail.
The news of Ant Financial’s suspension of listing has caused Alibaba stocks to suffer a heavy blow. On November 4th, Alibaba Hong Kong stocks opened plummeting 9.27%, and then the decline has narrowed. However, as of press time, Alibaba Hong Kong stocks are still down 6.6%, and the stock price is hovering at 280 Hong Kong dollars per share. In the A-share market, Alibaba concept stocks also fell sharply, with nearly 50 related concept stocks showing a downward trend.
Suspension of Listing
“It’s just a legend to get rich overnight!” For the sudden change of Ant Group’s listing, people in the financial circle are more playing the role of “eating melon. In contrast, retail investors who participated in the ant launch can’t help but ask, “A good listing!”
Ant employees are experiencing “big ups and downs” that others cannot appreciate. “Don’t be surprised, calm down…” An ant equity beneficiary posted to Moments to maintain stability.
Previously, the industry had predicted that if it can go public, Ant Group will bring a new round of wealth creation movement, and a large number of tens of millions and even billionaires will be born. Jack Ma, the senior executives of Ant Group and the company’s shareholders will benefit from it.
According to the prospectus previously disclosed by Ant, as of the date of the issuance of the prospectus, Junhan and Junao, as Ant’s employee shareholding platforms, respectively hold 29.8% and 20.6% of Ant’s shares, and are the controlling shareholders. After the issuance is completed, Junhan The total shareholding of Junao will not be less than 40%. Its general partner and executive partner is Hangzhou Yunbo. Jack Ma holds 34% of Hangzhou Yunbo, while Jing Xiandong, Hu Xiaoming and Jiang Fang each hold 22%.
Ma Yun has A-share feelings.
In November 2014, Jack Ma’s public voice “Hope that Ant Financial (Ant Group used to use its name) to be listed on A shares”, especially after Ali’s listing in the United States, the market has always believed that Jack Ma’s A-share sentiment will pass Ant Group. achieve.
Although Ant Group had avoided discussing the issue of listing before July 20 (announced the launch of the listing), the relevant work was well prepared. As early as the 2018 Spring Festival, Alibaba and Ant Group jointly announced that according to 2014 The strategic agreement signed by the two parties, approved by the board of directors, Alibaba will acquire a 33% stake in Ant Group through a Chinese subsidiary, and terminate the current profit sharing agreement with Ant Group.
Terminating the profit sharing agreement and straightening out the shareholding structure actually removed the biggest obstacle for Ant’s listing.
One hour after the Shanghai Stock Exchange announced the suspension of Ant’s listing plan, an Alibaba spokesperson said that he would actively cooperate with and embrace supervision with Ant. At the same time, he said that students who believe in Ant have the confidence and ability to implement their work well.
“Your company also reported changes in the financial technology regulatory environment and other major events. This major event may cause your company to fail to meet the issuance and listing conditions or information disclosure requirements.” The Shanghai Stock Exchange clearly pointed out the reasons for Ant Group’s suspension of listing.
Industry insiders pointed out that the changes in the financial technology regulatory environment mentioned by the Shanghai Stock Exchange refer to the China Banking and Insurance Regulatory Commission and the People’s Bank of China on the previous day’s public consultation on the “Interim Measures for the Administration of Online Small Loans (Consultation Draft)” (hereinafter referred to as ‘”Method”‘). The small loan business referred to by the tightening of regulatory documents is one of the main businesses of Ant Group.
For example, Guan Qingyou, director of the Institute of Financial Research, told the Caijing reporter that there was no precedent before this incident and the situation was rather special. From a regulatory perspective, whether the Shanghai Stock Exchange or the Hong Kong Stock Exchange, the regulatory environment has changed, the suspension of listing is inevitable and necessary. Whether it is technology or other channels, finance must be strictly regulated under current circumstances, because finance involves the security of the entire system. The qualitative and supervision of such a large company is also being reconsidered and continuously considered by the supervisory authorities.
“One of the reasons for Ant Group’s suspension of listing this time is the introduction of the new net loan method. However, the regulatory authorities have issued relevant regulations and the focus should be on preventing financial risks, rather than targeting the Ant Group.” Chief of Galaxy Securities Economist Liu Feng told a reporter from Caijing.
Liu Feng believes that at present, the interest rate differentials in domestic online lending are too large, and there are too many leverage cycles. If there is a mezzanine in the middle, the risks involved are very great. Take the 2008 subprime mortgage crisis in the United States as an example. One of the factors that led to this crisis was that technology drove many so-called financial innovations, but the regulatory system failed to keep up, which caused risks to accumulate and erupt.
“The entire listing process of Ant Group should be a big game.” Liu Feng told the reporter of Caijing. In fact, from the time of listing, the time of Ant Group’s selection this time was not good, because it was rushed. In the US election, this year’s epidemic and some local debt crises.
Guan Qingyou also pointed out that in the entire financial supply-side reform process, the financial sector and its supervision methods really need major reforms. The reform of the financial sector must learn from the lessons of Japan and South Korea in the late 1990s. The backward financial regulatory reform and the backward supervision methods restrict the entire structural adjustment. For example, the difficulty of financing and the delay in financing have a great relationship with our entire financial structure. “Ma Yun also unveiled a lid, but everyone has focused too much on Ant Financial’s own business model and whether it is regulated. I think this is a two-level problem.”
The Shanghai Stock Exchange stated in the notice that in accordance with Article 26 of the “Administrative Measures for the Registration and Management of Initial Public Offerings on the Science and Technology Innovation Board (for Trial Implementation)” and Article 60 of the “Shanghai Stock Exchange Rules for the Review of Stock Issuance and Listing” and other provisions, it also consulted sponsors According to the opinion, this Exchange has decided to suspend listing of your company. Your company and the sponsor shall make an announcement in accordance with the regulations, explaining the relevant circumstances of major issues and your company’s suspension of listing. The firm will maintain communication with your company and sponsors.
Investors in A+H shares have been enthusiastic about Ant IPO.
Earlier, media reports from Hong Kong brokerages revealed that the issuance in Hong Kong was only one hour away, and most Hong Kong stock institutions had oversold. In this regard, an investment banker also confirmed to the Caijing reporter that large investment institutions have the characteristics of large holdings and long holding periods. Therefore, it is more difficult for small institutions to get the share of ants. Find a relationship.
With the news of the suspension of the IPO, the new investors who have won the lottery were dumbfounded. Many investors told reporters from Caijing that they thought they could make a small profit and the funds had already been credited to their accounts. They did not expect the IPO to be suspended.
On the evening of November 3, at the same time that Ant Group announced the postponement of its IPO, it said that it would announce “further details regarding the suspension of H-share listing and the refund of the application monies as soon as possible.”
In the morning of November 4, Ant Group took the lead in announcing on the Hong Kong Stock Exchange the refund plan for the application funds for the Hong Kong public offering. It is reported that the application monies for the Hong Kong public offering (together with 1.0% brokerage commission, 0.0027% Hong Kong Securities Regulatory Commission transaction levy and 0.005% Hong Kong Stock Exchange transaction fee) will be refunded in two batches without interest.
An anchor participant of the Ant Group’s IPO told Caijing reporter that the money they invested in Ant has already started the refund process, “anchored participants are relatively convenient to refund.”
According to public information, the H-share subscription by Ant Group ended at noon on October 30. The final number of subscribers was nearly 1.55 million, and the funds were frozen at approximately HK$1.3 trillion. According to media reports, after this incident, H-share investors lost hundreds of millions of dollars in interest.
On the morning of the 4th, Futu Securities announced that it would waive subscription fees and all bank financing interests for all customers participating in the Ant IPO subscription. Futu will bear all related costs.
Huasheng Securities also told the reporter of Caijing that it will refund all subscription fees (whether cash or financing) and loan interest. Huasheng will bear the relevant bank financing costs. At the same time, it will give all participating customers a “Ant Group One More Time” Summoning Gift Voucher” is used to deduct the handling fee when Ant is reissued.
At the same time, the A-share sci-tech innovation board has not yet issued an announcement on the refund of the share subscription payment. There is no need to freeze funds in advance for new subscriptions on the Science and Technology Innovation Board, but the announcement shows that the successful investors have completed the payment of subscription funds on November 2 and are currently facing refund issues.
In this regard, many experts believe that A shares will also be refunded normally.
“In the history of the A-share market, there have been cases of IPO suspension after subscription and payment of new shares, but such a large-scale case like Ant Group is the first case.” Galaxy Securities strategy analyst Zeng Wanping told the reporter of Caijing: “When it comes to related refund matters, it should be done step by step, whether it is institutional funds or personal funds.”
Guan Qingyou believes that Ant’s suspension of listing will be a good thing for investors. Many investors do not understand that to buy financial stocks based on technology valuations, this valuation logic is inherently wrong. Companies with technology cards are actually Internet finance and technology finance. Qualitatively, they are regulated by finance and valued by financial institutions. Unlike the previous valuation of technology companies, this will definitely have an impact on subsequent corporate valuations.
As of press time, A shares have not yet released a refund plan.
Compared with retail investors, the flow of funds from strategic investors has also attracted much attention. Prior to this, the lineup of strategic investors for Ant’s IPO on the Sci-tech Innovation Board disclosed in the announcement was very strong. In addition to the previously disclosed Alibaba and National Social Security Fund, Ant’s strategic investors on the Sci-tech Innovation Board also include: China Investment, Canadian Pension, Singapore Government Investment, Temasek, Abu Dhabi Investment Authority and other global sovereign funds; China Life, Insurance companies such as PICC, Taiping, China Re, Sunshine, and Taikang; large state-owned enterprises such as PetroChina, China Merchants, Minmetals, and COSCO Shipping.
In addition, Ant has set a stricter lock-up period for strategic investors than the 12-month regulatory requirement. For strategic investors other than sponsoring and co-investment and ecological circle matching public offering funds, 50% of the allotment stocks that need to be promised are restricted for 12 months, and 50% are restricted for 24 months.
As early as October 23, the Ant Group IPO strategic investor subscription funds had been paid, and the funds were locked for more than one week than retail investors. Except for Zhejiang Tmall Technology Co., Ltd., the remaining strategic investors paid a total of 40.18 billion yuan.
According to a reporter from Caijing, there are differences in the views of the outside world on whether or not to refund strategic investors. Wang Jiyue believes that, on the one hand, Ant Group is facing repricing for its IPO; on the other hand, its performance growth in the future may be lower than expected, and some strategic investors may not participate, so strategic investors will also refund. However, some analysts believe that strategic investment is part of venture capital, and the basic market of Ant Group has not changed, so strategic investors will not refund.
The five funds previously exclusively sold by Alipay and participated in the strategic placement of Ant Group have been greatly controversial, and their follow-up disposal plans are currently attracting attention. According to the announcement, these strategic placement funds received 1.2 billion yuan of strategic placement quotas. In response to the suspension of Ant Group’s IPO, the China-Europe Fund responded to the Caijing reporter that the current strategic placement fund is still operating normally, and the next arrangement has not been notified. As of press time, China Asset Management has not responded.
A senior executive of a fund company revealed to a reporter from Caijing that the subscription funds of the strategic allotment fund will be returned to the fund for additional investment, and the strategic allotment fund will still operate normally. “This is already a good result. If (new regulations on small loans) are introduced after listing, there is a risk of falling below the issue price.”
“Currently, the funds for participating in the Hong Kong IPO are being returned, and the domestic IPO funds are being returned through procedures. Everyone is waiting for the exchange to notify. Not only the strategic funds, but the additional shares of this IPO are expected to be refunded to investors.” The above-mentioned executive said.
Value revaluation and hidden worries
The suspension is a foregone conclusion. What everyone cares about next is how long is the suspension period? Will Ants continue to be listed?
On the evening of November 3, the Xinhua News Agency and other authoritative official media all voiced: “Ant Group’s suspension of listing demonstrates its firm determination to protect the interests of investors.”
The article pointed out: “The suspension of Ant Group’s listing is based on the relevant regulations of the registration system, requiring companies to be listed to take practical actions to increase the transparency of the letter and disclosure in order to effectively maintain the healthy and stable development of the financial market.” At the same time, the article said: “Ant Group The most urgent task now is to earnestly rectify and reform in accordance with the requirements of the regulatory authorities.”
Regarding the IPO suspension period of Ant Group, the above-mentioned fund executives gave relatively pessimistic expectations, which may exceed one year. “If a company cannot go public due to major issues, it will take at least 6 months before it can submit new materials, so I think the deadline should be one year.”
Regarding the next rectification work of Ant Group, senior investment banker Wang Jiyue told the reporter of Caijing: “First, we must come up with a preliminary compliance plan, and secondly, we must wait for the (Interim Measures for the Management of Online Small Loans) to see if the draft for comments will be repaid. To adjust, it is necessary to obtain regulatory approval and adjust the business to comply with the regulations. Finally, it is necessary to reapply for the exchange’s securities regulatory commission to approve the issuance. It is not ruled out that the meeting will be renewed. Of course, the annual report and prospectus need to be updated.
Wang Jiyue further pointed out that the key to the length of the Ant Group’s suspension period is: when will the official draft of the new microfinance regulations be finalized and when the rectification plan can be approved by the supervision. “If only the (rectification) solution itself is given, it may be over in two weeks.”
According to an announcement by the Shanghai Stock Exchange, the introduction of new regulations on small loans is an important factor in the suspension of Ant Group’s IPO. Senior financial analyst Wang Pengbo introduced to a reporter from Caijing: “Ant Group now needs to reorganize its business, especially to assess the impact of the new policy, and then re-price the valuation. All these will take time.”
“Ant Group has little hope of going public this year.” Zeng Wanping told a reporter from Caijing: “Ant Group faces the problem of relisting in the future. The chain of possible listings is revaluation, repricing and relisting. And this part The time required for the work cannot be completed within one or two months.”
The duration of the suspension is unknown, but many experts agree that there is no problem with the listing of Ant Group itself. “There is definitely no problem with Ant’s listing. Just wait for it to complete the disclosure, and after the re-adjustment of the valuation caused by the policy changes, it will definitely give the market a satisfactory explanation.” Wang Pengbo told the reporter of Caijing.
Some market analysts believe that the Ant Group may divest the Huabei and Borrowing businesses. If so, the valuation of the Ant Group may shrink significantly. Even if these two businesses are not divested, under the constraints of the new network loan method, the micro-loan business that contributes the main profit to the Ant Group will shrink significantly, which will affect its valuation.
From the perspective of Ant Group’s various businesses, the micro-loan business is the business with the largest profit contribution. Almost half of Ant Group’s profits come from this business.
Data shows that Ant Group mainly conducts business through 20 important subsidiaries and 2 important joint ventures, divided into four major sectors: payment, micro-loan, wealth management, and insurance. The profits of the four sectors in 2020 will account for 32%, 53%, 11%, and 6.6% respectively. It can be seen that the profit contribution of payment and micro-lending business accounts for as high as 85%.
Huajin Securities recently released a research report to conduct segment valuations on the main businesses of Ant Group (this valuation is the valuation before the introduction of the new network loan method). Its valuations for the four major businesses of Ant Group payment, microfinance, wealth management, and insurance are 649.2 billion yuan to 988.9 billion yuan, 567.9 billion yuan to 674.9 billion yuan, 146 billion yuan to 168.9 billion yuan, and 2957-3451. 100 million yuan. Based on the above segment valuation method, the reasonable valuation range of Ant Group is 1.74 trillion yuan-2.29 trillion yuan, 56.82 yuan-74.89 yuan per share.
Among them, the market share of Ant Group’s payment business transaction scale is 55%. Huajin Securities predicts that the business’s revenue growth rate will be 12%-18% from 2021 to 2025, and cross-border payments may become a growth point. With reference to Paypal and Visa, under the target PE of 40 times, a reasonable valuation of 649.2 billion yuan to 988.9 billion yuan.
The micro-loan business has contributed to a loan balance of 2.15 trillion yuan, which is similar to Ping An Bank. The joint loan and hierarchical ABS model realizes risk transfer. Huajin Securities estimates that, driven by new technologies such as AntChain, the business’s profit growth rate will be 20%-30% from 2021 to 2025, with a reasonable valuation of about 567.9 billion yuan and 674.9 billion yuan.
It can be seen that the valuation contributed by Ant Group’s micro-loan business accounts for about 30% of its overall valuation.
According to industry insiders, the relevant regulations of Xinwangdai will compress the profit margins of online lending institutions such as Ant Group.
“For the ants, the set of numbers in Xinwangdai is fatal to them.” Zhang Xiaorong, dean of Deepin Technology Research Institute and former chief internet analyst of CITIC Securities, told Caijing reporter.
The fatal figure pointed by Zhang Xiaorong comes from the new network loan regulations: in a single joint loan, the proportion of capital contribution of a small loan company operating an online small loan business shall not be less than 30%.
He further analyzed that Ant Group mainly relies on joint loans and loan assistance models. In June of this year, it has reached a loan scale of 2.15 trillion yuan. Some market views claim that only 2% of the on-balance sheet loans belong to Ant Group, and the remaining 98% are issued or securitized by cooperative financial institutions.
Then, if the capital contribution ratio stipulated in the new network loan method is not less than 30%, this means that the capital of the Ant Group will be supplemented to 645 billion yuan with a scale of 2.15 trillion yuan.
“This number will make the ants feel heavy pressure.” Zhang Xiaorong said: “It will not only greatly reduce the space for lending, but also reduce the profit margin.”
However, the above-mentioned overseas analysts pointed out that if the non-financial valuation is used, the price of Ant will be relatively low, which is more beneficial to the IPO. If the valuation is based on the single-digit P/E ratio of the non-silver sector, Ant’s valuation will shrink a lot, but after it goes public, I believe the market will not give it too low valuation.
Ant Group is still facing certain market tests. Under the circumstances of changes in existing regulatory policies, it needs to find a business model that is more recognized by the market. The above-mentioned fund executives believe that the new regulations on small loans may reshape the business model of Ant Group. “If it is defined as a financial enterprise, (business) expansion will be greatly restricted, but the healthy development of the head platform is more guaranteed.”
Text | Caijing reporter Zhang Weitangjun Yang Xiuhong Zhang Xinpei