JD Could Withdraw Fintech Arm IPO Amidst Regulatory Crackdown: Report

Chinese e-commerce major JD.Com Inc’s (NASDAQ: JD) fintech unit, JD Technology, will likely withdraw its IPO application on Shanghai’s technology-heavy Star Market amidst China’s widespread crackdown on the extensive online finance industry, Bloomberg reports based on the South China Morning.

What Happened: JD Technology, previously known as JD Digits, was renamed after absorbing JD’s AI and cloud businesses earlier this year. The withdrawal was influenced by China’s regulatory policy update, which blocked Jack Ma’s ambitious Ant Group Co IPO in November.

China Communist Party recently prioritized data disclosure norms regarding search, e-commerce, and social media by the tech companies for the next five years to promote the healthy development of the sharing and online economies. Beijing was also reportedly launching a platform for sharing public and government data.

JD Technology was planning to rake around $3 billion (20 billion yuan) and might reapply going forward. JD.com stock shed 5% in Hong Kong on Monday.

Why It Matters: China’s fintech industry was rendered vulnerable since the introduction of new regulations on consumer lending in November, leading to the abrupt suspension of Jack Ma’s Ant’s planned $35 billion debuts in Hong Kong and Shanghai.

Beijing initiated a crackdown on alleged monopolistic practices by its giant internet industry last November over their growing influence from voluminous data collection.

The regulatory crackdown compelled the fintech companies to reconsider their IPOs and raise cash to adhere to the rules requiring online lending companies to provide 30% funding for loans. Previously, companies like Ant and Lufax Holding Ltd (NYSE: LU), the fintech arm of Ping An Insurance (Group) Co. Of China Ltd (OTC: PNGAY) (OTC: PIAIF) kept about 2% of their loans on their books.

JD Technology promoted its Chief Compliance Officer to the CEO last December to manage the growing regulatory crackdown.

Lufax, which went public in New York in October, had cautioned investors regarding its plan to raise the proportion of loan risk with lending partners to 20% from 2% due to regulatory trends. The stock declined close to 13% since Feb. 16. However, it is presently trading at 12.7% above its IPO price.

Price action: JD shares are trading lower by 3.92 at $87.16 in the pre-market session on the last check Monday.

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