Lufax Becomes The Next Short Seller Target After Ant IPO Halt: Report

Ping An Insurance Company of China, Ltd’s (OTC: PNGAY) wealth management and the retail lending unit has become a short seller target after suspension of Alibaba Group Holdings Ltd’s (NYSE: BABA)-backed Ant Group IPO, according to Bloomberg.

Fintech Lufax Holding Ltd (NYSE: LU) debuted in October. Ping An holds a 39% stake in Lufax after adjusting for the public issue.

What Happened: Lufax pushed through its U.S. listing before the Chinese authorities beefed up scrutiny of online peer-to-peer lending under the newly introduced local antitrust laws. The Chinese regulatory body, State Administration for Market Regulation, also introduced new compliance requirements to oversee tech companies, as reported by the Financial Times.

The tightening grasp of regulators is forcing investors and wealth managers to reconsider investment strategies in Chinese fintech companies under pressure both in the U.S. and at home.

Almost 34% of Lufax’s outstanding shares as of Nov. 17 represent short-interest, up from 5% when the Ant deal was suspended, as per Bloomberg. At the time, Lufax stock fell around 23%.

Why Does It Matter: A report released by Procensus on Nov. 5 labeled Lufax as “the community’s No. 1 consensus short,” after the $37 billion Ant Group IPO was ground to a halt. Processus’ results were based on 84 global investors’ responses with a collective AUM of $15.3 trillion -- Bloomberg.

Ping An has at least ten startups in recent years. China’s move to tighten regulation for fintech firms by boosting capital requirements and the Securities and Exchange Commission’s intention to propose a regulation to delist companies not complying with U.S. auditing rules poses a threat to the future IPOs by Ping An.

Presently, the Chinese insurance company plans an IPO launch for Ping An Smart City, a smart city technology company, and its health care management startup Ping An HealthKonnect.

Price Action: LU ADRs are trading lower by 2.26% at $14.28 in the pre-market session on the last check Monday. PNGAY closed lower by 0.22% at $22.93 on Friday.