Jack Ma's Ant Group Could See Its Valuation Halved Due To Blocked IPO, Analysts Project

Alibaba Group Holding Ltd. BABA-backed Ant Group could see its valuation slashed by half as its initial public offering is blocked by Chinese regulators, analysts from Morningstar, and others, estimate.

What Happened: The Chinese financial technology giant is headed to lose about $140 billion from its valuation, or half its pre-IPO valuation of $280 billion, the analysts are projecting, as reported by Bloomberg.

This would put Ant's valuation below what it was valued during its last major funding round in June 2018. The $14 billion funding round — led by Silver Lake, Warburg Pincus, and Temasek Holdings Ltd. — was the largest-ever single fundraising round for a company, according to Crunchbase.

Beijing announced new draft regulations for fintech firms,  earlier this month, which would force Ant to significantly change its business model. The draft regulations, if made into law, would require Ant to raise more capital in order to back the loans it grants to customers, and also seek national licenses to continue its operations.

Why It Matters: The Jack Ma-co-founded Ant’s IPO is stalled for at least six months, as it responds to the demands of Chinese regulators and files a new IPO prospectus in Hong Kong, a lawyer associated with the Ant listing told the Financial Times last week.

Ant would have begun trading on the Shanghai and Hong Kong stock exchanges last week — had the Chinese regulators not suspended the listings at the last minute. The fintech company was expected to raise $35 billion in what would have been the world’s largest IPO ever — ahead of Saudi Aramco’s $29.4 billion.

Duncan Clark, author of "Alibaba: The House that Jack Ma Built," told FT that China's "disinclination to allow entrepreneurs out of their lane" might have been the primary motivation behind slashing the Ant IPO hopes, especially in light of Ma's controversial comments against Chinese regulators and banks at a Shanghai event.

Price Action: Alibaba shares traded 0.28% lower at $299.10 in the after-hours session Friday.

Photo courtesy: World Economic Forum via Flickr