Squash

Ant, the biggest financial app in the world, gets "squashed" again

Tuesday, April 13, 2021 by Robinhood Snacks |

The biggest IPO... that never was. Ant Group is the Chinese fintech giant that was supposed to have the largest IPO ever. In November, Ant was on track to raise $34B+ in its Shanghai and Hong Kong IPOs (at a huge $300B valuation). Ant's Alipay app offers every money service imaginable (think: payments, loans, insurance, and investing... all in one). It's massive, with 1B+ users.

  • Strike 1: Last year, Ant's billionaire founder Jack Ma publicly criticized Chinese regulators for stifling innovation in the financial industry.
  • Strike 2: Ant's blockbuster IPO was suspended due to vague regulatory reasons. Then Ma wasn't seen in public from November to January (odd).
  • Strike 3 (The News): Ant will now apply to become a financial holding company overseen by China’s central bank — read: stricter regulation.

Jack of all problems... China may have felt threatened by Ant's financial dominance ($17T in digital payment transactions per year). Now, Ant will have to shrink its assets under management, and break an “information monopoly” on its vast consumer data. Ant is falling in line: it "will spare no effort in implementing the rectification plan.” But it's not the only one getting heat...

  • Alibaba — aka: the Amazon of China — was just fined a record $2.8B by China’s anti-monopoly regulator. BTW: Alibaba was also co-founded by Jack Ma... and it owns 33% of Ant (#facepalm).
  • Other Chinese tech giants are also facing fresh regulatory pressure: China recently fined Tencent, Baidu, Didi Chuxing, SoftBank, and others over anti-monopoly rules.
  • Also: China just launched its own digital currency, which could hurt Alipay (ICYMI: we covered that here).
THE TAKEAWAY

China's power > company's growth... China wanted to “set an example” for regulation of the platform economy... and it did. Not even billionaire Ma or Alipay's 1B+ users could stop that. Now, analysts expect Ant’s profit potential to fall as it scales back. In China, these regulatory crackdowns could limit future innovation in tech. Abroad, they could make investors think twice before buying into Chinese companies. And other companies might think more carefully about building a presence there.