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Stock exchanges in Hong Kong and Shanghai have suspended the initial public offering of Chinese tech giant Ant Group, due to the blockade of Chinese financial regulators who want the company’s business to comply with the new regulation.
The Central Bank of China has released new regulations for technological, financial and institutions microfinance that work online. Therefore, the Shanghai Stock Exchange indicates that due to the new regulations, Ant may have problems and will not be able to comply with the listing conditions.
The group’s upcoming double initial public offering was supposed to be a rare occurrence in the financial world, as Ant Group’s capitalization is double that of Goldman Sachs and Stanley Morgan combined. In fact, it would be a record release with an IPO value of $ 34.5 billion.
But quite unexpectedly, Ant ran into trouble when the Central Bank of China, along with the China Banking and Insurance Regulatory Commission, released a new bill on the regulation of microfinance institutions and lending platforms. via the Internet.
The new rules are intended to streamline the operations of financial institutions to minimize the risks to financial stability. The main goal is to ensure that all companies involved in financial activities are subject to the same regulations, he believes. Guo Tianyong, head of the Banking Research Center of the Central University of Finance of China.
“I believe that the key task of the current regulation is to strengthen the control over the functionality of the company, that is to apply the same regulation to those who are engaged in a similar activity in substance. Because some financial companies do not yet have financial licenses, for example , the Huabei and Jiebei divisions of Ant Group. Their business is in fact similar to that of bank credit cards, but they do not have a financial license “, underlines the expert.
In this situation, regulators believe that companies engaged in the same business should be subject to the same regulations, whether they are licensed or not, and should be subject to the same standards, he adds.
But if the new rules go into effect, it means that financial companies, including Ant Group, will have to do so adapt your business to these rules, which, in turn, means that the company’s stated plans for the public offering may change. Consequently, if the company actually exits the financial business and turns exclusively to technology, its capitalization in the market can decline significantly, Guo says.
“In theory no problem, the STAR Market of the Shanghai Stock Exchange places very high demands on the price of technology companies. Ant Group is dedicated to the Internet business working with big data and in a scientific and technical sense it is a very competitive company. its market capitalization can be revised because previously a significant portion of Ant’s income was generated from its financial business and the technology portion was only a support function, ”Guo continues.
Investors rate the companies second various criteria, both in terms of innovation and technology, and in terms of financial income. And if the company depends only on the tech business, its revenue will drop significantly and capitalization will no longer reach such a high level. In this way, if the company adapts its operations to the new regulations, its market capitalization will never be the same.
The new regulation is a direct consequence of the fact that innovations in finance have developed in China without tight control. However, over time, Chinese authorities have come to understand that financial firms have reached such a large scale that without proper legislation they can create systemic risks.
For example, in 2016, the largest p2p lending platform in Ezubao it went bankrupt, leaving 900,000 investors without $ 7.3 billion. In 2018 there was a huge market crash p2p.
Earlier this year, Chinese authorities drew up new regulations for companies in the financial sector that now have to obtain a license from a financial holding even though the company as a whole is not a financial organization, but two or more of the its divisions are engaged in financial services.
Ant Group was apparently trying to present itself as a tech company. To avoid such situations, the Chinese authorities have developed new specific rules for microfinance institutions and financial platforms on the Internet.
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