ANT GROUP IPO HALTED
There is a famous saying
When an unstoppable force meets and immovable object.
This is exactly what happen yesterday when Ant Group, which was due to IPO on 5th Nov, announced that they will have to halt its dual listing on Hong Kong and Shanghai exchange.
Now to be clear, this is not unusual and certainly not the first time an IPO is halted. However this was one of the largest IPO in history over $30bn and more than 800x over-subscribed.
The Unstoppable Force
Ant Group has been aggressively expanding its reach in China and very successfully. Various polls have shown that Alipay (of Ant) has been taking market share from its competitor, Wechat Pay (of Tencent).
However, the key success to Ant Group is not Alipay, it is their online lending business, CreditTech.
The online lending business has two products: Huabei, which is akin to a traditional credit card and Jiebei, which provide micro loans through Alipay.
In fact, some sources said that the total lending volume going through Ant Group is currently the largest in China. Even larger than the main banks in China.
The Immovable Object
However, with Ant Group grabbing so much of the financial lending in China. It presents a challenge.
Disclaimer: I am not a banking expert. All I am doing is infer.
Lending is the lifeblood of banking. Most banking relies on interest income to survive. With Ant Group sucking away so much retail dollars it definitely puts a strain on the main Chinese banks.
Furthermore Ant Group is not subjected to the same regulations as the traditional banks and that gives it an advantage…. until now.
My view is that Ant Group will be regulated like the traditional banks eventually. However, it is still unstoppable force. It is likely that the Chinese authorities will still support Ant Group eventually as it is to their benefit to tap on the technological advancement there.
Now back to Investing
Alibaba shares are down 8% and at one point even down 10% after the news is released. Once again investors giving way irrational fear. Can’t wait to see what is the Alibaba share prices in the HKEX when it opens later.
Disclosure: I own BABA options and shares.
