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Ant march halted: What Ma’s frozen IPO says about China business – Al Jazeera English
It was going to be the biggest public share sale ever, the most important international debut of China’s Ant Group that would bolster the financial-tech company and the prestige of the Shanghai and Hong Kong stock exchanges where it was poised to list.
Until, that is, China’s government stopped Ant’s initial public offering’s march in its tracks.
Officially, Ant Group’s $35bn IPO is on hold until it can comply with Chinese government regulations that went into effect on November 1, including fixing capital shortfalls.
Unofficially, analysts say the postponement is a serious muscle flex by Chinese President Xi Jinping over Ant’s founder, Jack Ma, who is the country’s second-wealthiest man. The suspension came days after Ma made a speech at odds with the Chinese Communist Party’s handling of the economy.
As the fallout continues, investors are eyeing what Ant’s fate means for international businesses in China’s authoritarian landscape. Here is what you need to know.
Psst, this is embarrassing, but what exactly is Ant Group?
Ant is the financial arm of e-commerce giant Alibaba and started out in 2004 as the site’s way to process payments. Ant’s Alipay app now has more than 730 million monthly users in China who use it to pay bills, shop and send money to friends. Ant’s services also include insurance, loans and asset management.
So it is a financial services company?
That is part of the debate. Ma has argued that Ant is more of a “techfin” rather than a “fintech” outfit. The company recently changed its name from Ant Financial to Ant Group.
Techfin, fintech – come again?
Ant claims it is a technology company that works with financial institutions, which means it would enjoy fewer regulations and more freedom under Chinese laws.
But Chinese financial regulators say Ant’s business model of connecting lenders and borrowers falls squarely under their oversight. And that is where Ant’s IPO train started to come off the tracks.
So what happened?
Ant was initially marching towards its November 5 IPO and attracting a lot of investors in the process – it had some $3 trillion in orders for its dual listing in Hong Kong and Shanghai. Ant’s IPO was expected to even eclipse the $29bn IPO for Saudi Arabia’s oil giant Aramco, so far the world’s biggest public share sale. But then Ma, a 56-year-old former English teacher, got called into the principal’s office.
Uh-oh. Why?
During a speech at the Bund conference in Shanghai on October 24, Ma opined that the world “only focuses on risk control, not on development, and rarely do they consider opportunities for young people and developing countries.”
Ma expressed that financial regulators seem a kind of club for the elderly who want to play it too safe, something that is not good for “youth” economies like China’s.
That doesn’t sound so bad.
Ma’s comments came just hours after the conference keynote’s speaker, Chinese Vice President Wang Qishan, struck a more cautious note, saying that China would “keep away from the wrongful paths of excessive speculation, self-reinforcing cycles of financial bubbles and Ponzi schemes.”
Ma was called to Beijing for a meeting with government officials on November 2. The next day, Ant’s listing was pulled from the Shanghai stock exchange.
Ouch. What was the official reason?
Chinese regulators called the company’s leadership in for “supervisory interviews by relevant departments,” the Shanghai stock exchange said in a statement announcing Ant’s IPO suspension, which also mentioned “changes in the financial technology regulatory environment and other major issues.”
What did the whole thing cost Ma?
Ma’s stake in Alibaba Group Holding, which owns a chunk of Ant, fell about $3bn after the IPO was postponed, Bloomberg reported. The company is now in the process of implementing the guidelines from that Beijing meeting so it can get back out there.
But the China Banking and Insurance Regulatory Commission may also impose new rules on Ant’s credit platforms, Bloomberg reported, citing sources familiar with the matter, which may mean Ma’s headaches are far from over.
OK, so for now, Ant goes marching on. But is there lasting fallout?
Maybe. China’s government seems to be sending a clear signal that it is not afraid to step in and cancel the party when a private company does not play by its rules. And that could spook investors who are keen to get in on the world’s second-largest economy – but are not eager to toe the Communist Party line.
Tesla has promised to start selling cheaper models next year, days after a Reuters report revealed that the company had shelved its plans for an all-new Tesla that would cost only $25,000.
The news that Tesla was scrapping the Model 2 came amid a drop in sales and profits, and a decision to slash a tenth of the company’s global workforce. Reuters also noted increased competition from Chinese EV makers.
Tesla’s deliveries slumped in the first quarter for the first annual drop since the start of the pandemic in 2020, missing analyst forecasts by a mile in a sign that even price cuts haven’t been able to stave off an increasingly heated competition on the EV market.
Profits dropped by 50%, disappointing investors and leading to a slump in the company’s share prices, which made any good news urgently needed. Tesla delivered: it said it would bring forward the date for the release of new, lower-cost models. These would be produced on its existing platform and rolled out in the second half of 2025, per the BBC.
Reuters cited the company as warning that this change of plans could “result in achieving less cost reduction than previously expected,” however. This suggests the price tag of the new models is unlikely to be as small as the $25,000 promised for the Model 2.
The decision is based on a substantially reduced risk appetite in Tesla’s management, likely affected by the recent financial results and the intensifying competition with Chinese EV makers. Shelving the Model 2 and opting instead for cars to be produced on existing manufacturing lines is the safer move in these “uncertain times”, per the company.
Tesla is also cutting prices, as many other EV makers are doing amid a palpable decline in sales in key markets such as Europe, where the phaseout of subsidies has hit demand for EVs seriously. The cut is of about $2,000 on all models that Tesla currently sells.
By Charles Kennedy for Oilprice.com
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Divisions within the Bank of Canada over the timing of a much-anticipated cut to its key overnight interest rate stem from concerns of some members of the central bank’s governing council that progress on taming inflation could stall in the face of stronger domestic demand — or even pick up again in the event of “new surprises.”
“Some members emphasized that, with the economy performing well, the risk had diminished that restrictive monetary policy would slow the economy more than necessary to return inflation to target,” according to a summary of deliberations for the April 10 rate decision that were published Wednesday. “They felt more reassurance was needed to reduce the risk that the downward progress on core inflation would stall, and to avoid jeopardizing the progress made thus far.”
Article content
Others argued that there were additional risks from keeping monetary policy too tight in light of progress already made to tame inflation, which had come down “significantly” across most goods and services.
Some pointed out that the distribution of inflation rates across components of the consumer price index had approached normal, despite outsized price increases and decreases in certain components.
“Coupled with indicators that the economy was in excess supply and with a base case projection showing the output gap starting to close only next year, they felt there was a risk of keeping monetary policy more restrictive than needed.”
In the end, though, the central bankers agreed to hold the rate at five per cent because inflation remained too high and there were still upside risks to the outlook, albeit “less acute” than in the past couple of years.
Despite the “diversity of views” about when conditions will warrant cutting the interest rate, central bank officials agreed that monetary policy easing would probably be gradual, given risks to the outlook and the slow path for returning inflation to target, according to the summary of deliberations.
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They considered a number of potential risks to the outlook for economic growth and inflation, including housing and immigration, according to summary of deliberations.
The central bankers discussed the risk that housing market activity could accelerate and further boost shelter prices and acknowledged that easing monetary policy could increase the likelihood of this risk materializing. They concluded that their focus on measures such as CPI-trim, which strips out extreme movements in price changes, allowed them to effectively look through mortgage interest costs while capturing other shelter prices such as rent that are more reflective of supply and demand in housing.
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They also agreed to keep a close eye on immigration in the coming quarters due to uncertainty around recent announcements by the federal government.
“The projection incorporated continued strong population growth in the first half of 2024 followed by much softer growth, in line with the federal government’s target for reducing the share of non-permanent residents,” the summary said. “But details of how these plans will be implemented had not been announced. Governing council recognized that there was some uncertainty about future population growth and agreed it would be important to update the population forecast each quarter.”
• Email: bshecter@nationalpost.com
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Shares in US tech giant Meta have sunk in US after-hours trading despite better-than-expected earnings.
The Facebook and Instagram owner said expenses would be higher this year as it spends heavily on artificial intelligence (AI).
Its shares fell more than 15% after it said it expected to spend billions of dollars more than it had previously predicted in 2024.
Meta has been updating its ad-buying products with AI tools to boost earnings growth.
It has also been introducing more AI features on its social media platforms such as chat assistants.
The firm said it now expected to spend between $35bn and $40bn, (£28bn-32bn) in 2024, up from an earlier prediction of $30-$37bn.
Its shares fell despite it beating expectations on its earnings.
First quarter revenue rose 27% to $36.46bn, while analysts had expected earnings of $36.16bn.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said its spending plans were “aggressive”.
She said Meta’s “substantial investment” in AI has helped it get people to spend time on its platforms, so advertisers are willing to spend more money “in a time when digital advertising uncertainty remains rife”.
More than 50 countries are due to have elections this year, she said, “which hugely increases uncertainty” and can spook advertisers.
She added that Meta’s “fortunes are probably also being bolstered by TikTok’s uncertain future in the US”.
Meta’s rival has said it will fight an “unconstitutional” law that could result in TikTok being sold or banned in the US.
President Biden has signed into law a bill which gives the social media platform’s Chinese owner, ByteDance, nine months to sell off the app or it will be blocked in the US.
Ms Lund-Yates said that “looking further ahead, the biggest risk [for Meta] remains regulatory”.
Last year, Meta was fined €1.2bn (£1bn) by Ireland’s data authorities for mishandling people’s data when transferring it between Europe and the US.
And in February of this year, Meta chief executive Mark Zuckerberg faced blistering criticism from US lawmakers and was pushed to apologise to families of victims of child sexual exploitation.
Ms Lund-Yates added that the firm has “more than enough resources to throw at legal challenges, but that doesn’t rule out the risks of ups and downs in market sentiment”.
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