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November 25, 2021updated 03 Dec 2021 3:16pm

One year after the cancelled IPO: China’s Ant Group restructures “to give users clarity”

By Eric Johansson

After Ant Financial cancelled its initial public offering (IPO) last year, the fintech is now being restructured to appease Beijing. Details have now started to emerge about what shape the company will take after the overhaul, but that hasn’t prevented investors from cutting the company’s valuation, according to reports.

The news comes a year after Alibaba affiliate Ant was forced to bin its highly anticipated IPO in October 2020. The $34.5bn listing would’ve been the biggest one ever recorded and would’ve given the company a $315bn market cap.

Chinese President Xi Jinping himself had reportedly ordered the float to be halted after founder and owner Jack Ma made comments which infuriated government officials.

As part of Beijing’s ongoing crackdown of the country’s tech sector, Ant has been forced to restructure the company in adherence to the nation’s financial services regulations.

“After the shock and awe of last year’s move by Xi Jinping to humiliate an obstreperous Jack Ma and force a punitive last minute postponement of Ant’s $34.5bn Hong Kong float, Ant remains in the midst of a multi-layered, multi-staged regulatory process, which will almost certainly not be completed before the end of 2022,” Michael Orme, senior analyst at GlobalData and China specialist, tells Verdict.

“This time Ant is the victim of Xi’s ‘common prosperity’ policy which aims, among many other things, to take back control of the online financial economy from the tech giants, who are now seen to have been often irresponsible lenders to over-indebted and uncreditworthy individuals and SMEs, and to have used their muscle to snuff out innovative competitors.”

Common prosperity refers to Xi’s new focus on moving away from four decades of acceptance for people to become wealthy, and onto a stricter focus on providing a wealth for everyone on equal terms.

While details about Ant’s restructuring are still scarce, the company is seemingly overhauling its two main products, Huabei and Jiebei. Huabei means “spend” in Mandarin and Jiebei means “borrow.” The products pretty much do what they say on the tin.

Before Ant stopped its IPO, the company had originated loans that were then underwritten by third-party financial institutions, as reported by TechCrunch.

Users have now reported that Jiebei is now being divided into two brands to provide users with more clarity as to who is really behind the loans.

Loans provided by Ant will stay under the Jiebei brand, while third party loans will be found under the new Xinyong Dai brand on the Alipay app.

Huabei released a note on Chinese social media platform Weibo this week, saying it will boost transparency on whether loans are run by Ant or third parties.

“Brand isolation means a clear distinction between the new consumer services provided by financial institutions and it aims to avoid brand overlap,” Ant explained in the post.

The company added that this would give users a better understanding of what they were signing up to. It also made no secret that the changes are being made to implement “regulatory requirements related to the consumption of new products and to fully protect the rights and interests of consumers (as Huabei initiates) its brand isolation efforts.”

The news comes on the back of Ant boosting its capital base to $5.4bn as part of the restructuring process, as reported by GlobalData.

While the restructuring is due to pressure from Beijing, it has seemingly caused Ant investor Warburg Pincus to cut its valuation of the company by 15% to $191bn, according to sources speaking with Reuters.

Ant didn’t return requests for comment ahead of the publication of this story.