Ant Group’s Scrubbed IPO Triggers U.S. Failure to Launch Claim Against Alibaba | Forum

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wisepowder
wisepowder Nov 20

When I heard that moves by Chinese financial regulators had forced the Shangahi securities market to suspend Ant Group’s massive planned IPO, my first thought was that, if the offering had been planned for the U.S. the called halt to the offering might well give rise to a “failure to launch” claim. However, since Ant Group’s IPO was planned for the Shanghai and Hong Kong exchanges, the possibility of a claim seemed remote. As it has turned out, however, a failure to launch claim has been filed in the U.S. after all, with the added twist that the corporate defendant in the lawsuit is not Ant Group itself, but instead it is Alibaba, the U.S.-listed Chinese Internet commerce company that owns 33% of Ant Group’s equity interest. As discussed below, the new lawsuit against Alibaba has a number of interesting features.To get more latest ant group news, you can visit shine news official website.
Background

Ant Group is a Chinese online payments and lending processing company offering a wide variety of services and financial products, including insurance, the sale of mutual fund investments, and utility bill payments. Ant grew out of an online escrow service called Alipay created in 2004 within Alibaba Group Holding Ltd. Jack Ma, Alibaba’s co-founder and then-Chief Executive, later carved out the business, and as it grew the business was renamed to Ant Group. Ma is considered China’s wealthiest individual.

On July 20, 2020, Ant Group announced that it has begun the process for a concurrent initial public offering on the Shanghai and Hong Kong stock exchanges. On October 26, 2020, Ant Group priced its IPO and was set to raise $34.5 billion. The target date for the IPO was November 5, 2020. A completed offering of that size would have made the Ant Group offering the largest IPO in history, larger even than Saudi Aramco’s December 2019 $29.4 offering, as well as Alibaba’s own September 2014 $25 billion offering in the U.S.

On Monday, November 2, 2020 Chinese regulators summoned various Ant company officials to a meeting, including Ma; Eric Jing, Ant’s executive chairman; and Ant’s Chief Executive Simon Hu. The meeting including representatives from four Chinese financial regulators, including the People’s Bank of China, the China Banking and Insurance Regulatory Commissions, the China Securities Regulatory Commission and the State Administration of Foreign Exchange. According to a November 2, 2020 Financial Times article about the meeting (here), “the Chinese word used to describe the interview – yuetan – generally indicates a dressing down by authorities.”

According to Ant, in the meeting, “views regarding the health and stability of the financial sector were exchanged.” The Ant executives were also apprised of new draft rules from China’s banking regular regarding microlending. If implemented the new rules could slow the expansion and profitability of Ant’s fast-growing consumer business and lending units.
On Tuesday, November 3, 2020, Ant Group disclosed that the Shanghai stock exchange suspended Ant’s debut, which had been planned for Thursday November 5, 2020. The Ant Group statement said that the exchange had suspended the offering because Ant Group “may not meet listing qualifications or disclosure requirements due to material matters related to” the November 2 meeting, and also because of “the recent changes in the Fintech regulatory environment.”

A November 12, 2020 Wall Street Journal article (here) said that Chinese President XI Jingping “personally made the decision to halt the initial public offering.” The Journal article suggests that statements Ma had made at an October 24, 2020 financial forum in Shanghai had “infuriated” Chinese government officials.

Ma took the stage at the October 24 event after a senior regulatory official had, in his own speech, said that China needed to safeguard its financial system from systemic risks. In his speech, Ma reportedly said that “we cannot regulate the future with yesterday’s means,” adding that “There’s no systemic financial risks in China because there’s no financial systems in China. The risks are a lack of systems.”

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