Graphic shows steps that led to failure of Ant Group’s initial public offering.
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BUSINESS

Biggest busted trade in stock market history

By Duncan Mil

November 9, 2020 - China’s decision to torpedo Ant Group’s initial public offering (IPO) sent the fintech giant scrambling to abide by new financial regulations that could cut the company’s value by as much as US$140 billion.

Ant Group is the parent of Alipay, China’s most powerful online e-payment system, used by 1.3 billion people across Asia. Ant’s $34 billion stock debut in Shanghai and Hong Kong would have valued the company at an eye-watering $315 billion.

After Ant set the listing price for its stock, investors stampeded to place orders. Banks and brokerages provided about $64.5 billion of margin loans to retail and “mom-and-pop” investors -- small investors -- to buy Ant shares charged at up to 5 per cent.

On October 16, the Communist Party-controlled People’s Bank of China drafted new risk-mitigating rules for banks. Online lending companies such as Ant’s Alipay would be required to underwrite at least 30 per cent of funding for loans.

Three days before Ant Group announced its listing, Jack Ma -- the company’s controlling shareholder and celebrity founder of the e-commerce giant Alibaba -- made a controversial speech at the Bund Summit in Shanghai.

Ma criticised financial regulators for being obsessed with minimising risk. “There is no innovation in this world without risk,” Ma said. He then slammed China’s banks of behaving like “pawn shops” -- lending only to those who could put up collateral.

The Communist Party did not appreciate Ma’s comments. Chinese regulators pulled the plug on Ant’s IPO on November 3. Ma’s remarks at the Bund Summit may have been the most expensive speech in history.

PUBLISHED: 09/11/2020; STORY: Graphic News; PICTURES: Getty Images
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