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This week should have made Jack Ma China’s richest man again, and his company Ant Group’s stock market debut should have been the biggest in history.
Things didn’t quite go as planned.
Ant was slated for a double listing on Thursday in Hong Kong and Shanghai worth around $ 34.4 billion (£ 26.5 billion).
Instead, the list was put on hold after a last minute grilling from Chinese financial regulators.
Mr. Ma’s shares were worth around $ 17 billion and are said to have brought his net worth to around $ 80 billion.
“This deal wasn’t just cleared for take-off, the wheels literally took off,” says Drew Bernstein, co-managing partner at Marcum Bernstein & Pinchuk, which advises Chinese companies.
Some analysts saw the move as Beijing’s attempt to humiliate a company that has become too powerful and a leader that has become too outspoken.
So how did Mr. Ma – a man who came from meager beginnings to become a symbol of China’s potential and growing technological might – become a threat?
From rags to wealth
Mr. Ma raised the anger of Chinese government officials at a financial technology conference last month in Shanghai, where he compared the Chinese state-dominated banking sector to “pawn shops” and lamented their lack of innovation.
In some ways, this was vintage Jack Ma, according to Duncan Clark, author of Alibaba: The House Jack Ma Built.
“It’s not the first time he’s been off leash. He just doesn’t like to follow a particular storyline or story. And he likes to be provocative, like any great storyteller, ”he says.
And like many great storytellers, he often draws on autobiographical details. He tells his own story as a story of perseverance, but he never forgets his failures and struggles.
He grew up poor in Hangzhou, struggled in school, and failed his college entrance exams twice. When he tried to find work, he was turned away by dozens of employers. He applied 10 times to Harvard, but never entered.
Perhaps most famous, he applied to work at KFC, only to find out later that of the 24 people they interviewed, he was the only one who couldn’t find a job.
He passed his college entrance exam on the third attempt and went to the teachers college. He remained for several years thereafter as an English teacher. And it was during a trip to the United States as a translator that he first discovered the Internet.
After an internet business failed, he founded Alibaba in 1999 with $ 60,000 loans he cobbled together with friends.
Alibaba has seen huge success, dominating Chinese e-commerce and raising $ 21.8 billion in its own initial stock sale in 2014. It officially retired from Alibaba last year.
These days, of course, he’s not always seen as David confronting Goliath.
“He made a living by being underestimated. It is getting more and more difficult. As you get richer and more powerful, the expectations grow, ”says Clark.
“ Pure interest scale ”
Expectations had certainly built up for the market debut of Ant Group.
Ant’s best-known service, Alipay, started out as Alibaba’s payment platform. He held the payments in escrow until the buyers received their purchase. It was central to Alibaba’s growth as it made shoppers feel more secure while shopping online. Now, it is more widely used than cash or credit cards in China.
The company was split in 2011 and later renamed Ant Financial and then Ant Group. Alibaba suggested at the time that the move was due to regulatory changes in China. Jack Ma took a significant stake in the spin-off company, which expanded into other financial services such as insurance, wealth management and consumer lending.
Many analysts believe it was not retribution from officials that sabotaged Ant’s early days. Mr Ma’s comments may have been rude, Mr Clark says, but they weren’t the only reason regulators were concerned.
“My instinct was that this was the sheer scale of interest in the offering and the way people raised money, often through debt, to invest,” he says.
The Reuters news agency reported that banks were loaning huge sums of money to retail investors.
Ant’s consumer credit division is more of a matchmaker than a bank. It gives loans to small businesses and individuals, but transfers them to banks, which guarantee them.
Ant collects fees from the banks, but without the obligation to hold its reserves, and with less risk to its own balance sheet.
Cautious Chinese regulators have been concerned for some time about the growing number of online lenders in China and how they might affect the wider financial system.
According to the draft regulations released by the People’s Bank of China on Monday, online lenders must provide at least 30% of any loan they jointly finance with banks.
When the IPO was suspended, the Hong Kong Stock Exchange said it was because the company “may not meet listing requirements or disclosure requirements” and also suggested that “recent changes in the fintech regulatory environment ”could have been an obstacle.
“It’s really very important. But I don’t think China will bow to one deal. They’re not going to put their financial system at risk for just one deal, ”says Drew Bernstein.
The path to follow
It almost seems inconceivable that Ant wouldn’t come back with a new prospectus and try another start in the stock market.
“The company will have to restructure itself somewhat. Maybe commit a little more capital to the loan division, apply for more licenses. Then they can come back to the market, ”says Bernstein.
Some analysts believe there will be pressure to separate completely from the consumer loans division.
According to some estimates, Mr. Ma personally lost billions when the launch of the action failed. But determination is a defining characteristic of its history.
A man who has applied 10 times to Harvard seems unlikely to be deterred by a single rejection from regulators.
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