Government Halts IPO

| November 10, 2020

It seems that the Communist Chinese government under Xi JinPing is not happy that a financial institution like Ant has an IPO valuation higher than was expected. As a result, the government is moving to clamp down on Ant and reduce the IPO per share price.

https://www.business-standard.com/article/international/china-s-move-to-halt-ant-ipo-could-slash-fintech-giant-s-value-by-140-bn-120111000029_1.html

From the article:  New regulations that could force Ant to raise more capital to back lending and seek national licenses to operate across the country may reduce the firm’s valuation by about half, according to estimates from Morningstar Inc. and other firms. The regulatory details are preliminary and could be subject to change.

If Ant’s $280 billion pre-IPO valuation is halved, it would essentially mean the company is worth less than what it was two years ago when it raised money from some of the world’s largest funds including Warburg Pincus , Silver Lake Management LLC and Temasek Holdings.

The reduced valuation also means potentially lower fees for investment banks like China International Capital Corp that were counting on a windfall from Ant’s record-setting IPO. – article

Ah! The Communist Chinese government does not like it when the in-house companies under its watch get too big for Xi Jinping’s britches.

The issue here is the profit available from the IPO stock when sold. Instead of going into a high-end valuation, the stock price is predicted now to decline by up to 50% of its prior value, which leaves Ant with less leverage than it had.

But that is not all: Jack Ma, head of Ant, was summoned to explain himself to the Chinese government because he criticized the country’s state-owned banks.

https://www.ft.com/content/c1ee03d4-f22e-4514-af46-2f8423a6842e

Now, where this leads remains to be seen, but it is obvious that The State (meaning Xi JinPing) does not like competition or criticism, hence Ma having to explain himself to the government. The fact that the anticipated, and now doubtful, IPO would likely have made Jack Ma a multibillionaire has a lot to do with it. He could ostensibly move his entire organization out of the reach and control of the Chinese government.

Welcome to the Real World of Communist China. Mind the first step: it’s a doozy, and don’t let the door hit you on the way down.

Category: "The Floggings Will Continue Until Morale Improves", China

Comments (5)

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  1. 5th/77th FA says:

    spapos seagull showing up to screeeeee China is NOT Communist…oh…and…ORANGE MAN BAD in 3.2.. I think everybody is sick of his vulgar, personal attack drivel. I’m wearing out my scroll key going past it all.

    Seeing how the Chinese Communist treat the business that they don’t have complete control of gives one an idea of what businesses here can expect from the Harris Administration in a few months.

  2. Mustang Major says:

    Cooked books usually back up Chinese stocks. Avoid them.

    Just one of many stories:

    https://www.fool.com/investing/2020/04/04/heres-why-i-try-to-avoid-chinese-stocks.aspx

    If you see a positive story on a Chinese stock, there is usually a paid stock promoter not far away.

  3. Anonymous says:

    Democrats get a hardon watching this.