Scottish Mortgage holding Ant Group's record flotation suspended

Ant Group’s stock market listing, which was set to be world’s largest initial public offering, suspended by Chinese regulators, knocking shares in the e-commerce giant Alibaba from which the payments processor was spun off 16 years ago.

(Update) Ant Group’s stock market listing, which had been set to be the world’s largest ever initial public offering, has been suspended at the eleventh hour by Chinese regulators, in a setback for backer Baillie Gifford and the unquoted investment strategy of its Scottish Mortgage (SMT ) investment trust.

Ant, the financial services arm of Chinese tech giant Alibaba (BABA.N), had raised $37bn for a dual listing on the Shanghai and Hong Kong stock exchanges due to take place on 5 November.

But that was halted by the Shanghai bourse today, after former Alibaba head Jack Ma (pictured above) and other Ant executives were hauled in for meetings with officials yesterday.

A statement on the Shanghai Stock Exchange said that following the ‘joint regulatory interview’ and Ant itself reporting on ‘material matters including a change in the regulatory environment on financial technology’, the company ‘may no longer meet the conditions for offering and listing, or the requirements for information disclosure’.

Accordingly, the exchange decided to suspend the listing on its Nasdaq-style STAR Market.

Ant said that consequently the listing in Hong Kong had also been suspended, with a statement made via the exchange referencing ‘material matters relating to the regulatory interview of our ultimate controller, our executive chairman and our chief executive officer’ as well as changing fintech regulation.

Chinese regulators summoned Ma, Ant’s executive chairman Eric Jing and chief executive Simon Hu to a meeting on Monday, when they were told the company’s online lending business would face greater government scrutiny, according to Reuters.

Shares in Alibaba, which owns about a third of Ant with Ma retaining a controlling stake, slid 8% in the US, casting a shadow over several global and Asia trusts with big positions in the e-commerce giant. Manchester & London (MNL ), for example, holds 11.9% of its assets in Alibaba, Fidelity China Special Situations (FCSS ) 15.9% and JPMorgan China Growth & Income (JCGI ) 10.2%, according to Numis Securities.

At a summit in Shanghai at the end of October, Ma had criticised China’s state-owned banks , saying they had a ‘pawnshop mentality’ and that Ant was playing an important role in extending credit to innovative businesses, according to the Financial Times.

The Alipay-operator is the biggest unquoted holding in £14.7bn SMT, Baillie Gifford’s flagship investment trust, and its twelfth largest position overall.  SMT, which has been increasing its focus on private investments, held 1.9% of total assets in Ant at 30 September. Sister trust Monks (MNKS ) held a 0.5% weighting. SMT also has 6.1% in Alibaba and Monks 2.5%.

Iain Scouler, an analyst at Stockbroker Stifel, said previously that while the IPO would not have resulted in a major windfall in terms of immediate returns, a successful listing for Ant would have bolstered investor confidence in the trust’s tilt towards unquoted investing.  

With Ma’s recent comments appearing to have irked the Chinese state, the dramatic suspension of the IPO also serves as a reminder of Beijing’s willingness to assert its dominance in private and public markets.  

In an additional statement, Ant apologised to investors for any inconvenience caused by the suspension of the IPO and said it would remain in close communication with the Shanghai exchange and regulators with respect to further developments in the listing process.

On a day when the UK stock market advanced over 2% on hopes of a clear victory by Democratic contender Joe Biden in the US election, SMT shares were not too subdued by the news on Ant, adding 1.8%. They have soared 72% this year.

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