Jack Ma crosses a line . . .
It was supposed to be the largest initial public offering (IPO) in history. But the Shanghai Stock Exchange stunned investors around the world when it announced Monday evening that it was suspending Ant Group’s estimated US$34-billion IPO. The announcement came as a complete shock to mom-and-pop retail investors who were in the process of investing personal savings in the IPO. The stock exchange’s abrupt announcement has been interpreted as Beijing punishing Ant founder Jack Ma for publically criticizing the functioning and structure of China’s financial sector.
Retail investors left in the lurch . . .
Ant Group’s IPO was both financially and symbolically significant. Pundits saw Ant Group’s decision to reject New York’s financial markets and “return home” to China as both an economic and cultural coup for China – evidence of the rise of China’s financial prowess. But now, those same eager and patriotic retail investors located in China and around the globe have been left in the lurch. Banks offering special loans to retail investors aided the frenzy around investing personal savings in the IPO. While some banks have indicated that they’ll waive interest rates on margin loans to those who have subscribed to Ant shares, it has left many investors scared and confused.
Hurting Ma, hurting me . . .
The whole ordeal arose from the critical comments Jack Ma reportedly made about China’s financial system. In a show that not even the richest entrepreneur in China may criticize China’s governance and regulatory structures, Chinese officialdom halted Ma’s epic IPO. However, in conducting such a brute show of strength, Beijing may have inadvertently shot itself in the foot. A considerable part of the whole fanfare around the Ant Group IPO was to demonstrate that Chinese stock markets were the future and that New York was the past. By showing how quickly China’s financial situation can change within a week, Beijing may be sowing doubt more than confidence among investors both at home and abroad.