Beijing, Nov 4 (efe-epa).- The shares of Chinese e-commerce giant Alibaba plummeted Wednesday following the sudden announcement the previous night of the suspension of the IPO of its financial tech subsidiary, Ant Group, which was set to be the biggest stock debut in history.
The Alibaba stock fell by 8.13 percent at the New York stock exchange during Tuesday trading.
During the first few minutes of Wednesday trading, Alibaba shares plunged 8.74 percent at the Hong Kong stock exchange, where it has been listed for a year.
Ant had drawn more than $3 trillion in orders from retail investors across its planned dual listings in Hong Kong and Shanghai and was aiming to raise $34.5 billion from the IPO, an amount that could have risen to as high as $39.6 billion if the company exercised its greenshoe, or overallotment option.
The price per share set by the fintech for the concurrent IPO on the Shanghai and Hong Kong stock markets valued the company at more than $313 billion.
Ant’s plans were to go public simultaneously on Thursday in Shanghai and Hong Kong, something that no private company had done so far.
However, on Tuesday night, the Shanghai Stock Exchange informed the company about the freezing of its leg of the IPO. Ant subsequently decided to call a halt to the Hong Kong portion of the dual listing.
In an article on Tuesday evening, state-owned newspaper Economic Daily said that the China Securities Regulatory Commission suspended Ant’s IPO in Shanghai “in a bid to better protect investors and ensure the long-term healthy development of the market,” state broadcaster CGTN reported.
“Following the principles of openness, fairness and justice, regulators are solving the problems in the capital market,” the newspaper added, according to CGTN.
The article said that the suspension sent a clear signal to the markets about the regulations and that “everyone must respect the rules.”
“There is no exception,” Economic Daily stressed, adding that “only through better protection of investors, more support could be ensured for listed companies of good quality, as well as a sound development of China’s capital market.”
In this regard, Economic Daily recalled that China’s registration-based IPO system stipulates that regulators must supervise every step of the process, in which companies are required to maintain transparency.
The state media said that the companies in question should set an example in these aspects of their operations according to the law, risk prevention and social responsibility and added that Ant’s main priority was to understand the rectifications it has to make according to the requirements of regulatory authorities.
The daily also said that if problems were encountered, regulators must decisively correct and resolve them.
The decision to suspend Ant’s dual listing was made after a day after Chinese regulators held a meeting with two senior Ant executives the company’s controlling shareholder, Jack Ma – founder of Alibaba and richest man in China – which some analysts link to recent public criticism of bureaucracy and fear of risk in Beijing’s management of the country’s financial system.
In its explanation of the decision, the Shanghai stock exchange referred directly to that meeting and also to the latest change in the regulation for fintechs, which includes greater restrictions on the sector in terms of leverage and capital contributions.
In a letter to investors, Ant said it “sincerely apologizes to you for any inconvenience caused by this development,” explaining that it will shortly make public details about the reimbursement of the money paid to apply for the firm’s shares.
“We will keep in close communications with the Shanghai Stock Exchange and relevant regulators, and wait for their further notice with respect to further developments of our offering and listing process and disclose in a timely manner,” Ant added. EFE-EPA