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Big US tech companies must watch with joy as China crack down on its local tech companies. They are thrilled not only because they see potential global competitors in e-commerce, music licensing, ridesharing, food delivery and more weakened, but because they now have a powerful card to play in the game. House.
It all started last October when Jack Ma, founder of Alibaba and its subsidiary Ant Financial, complained at the Bund summit in Shanghai that regulators were being too cautious: “There is no innovation in this world without risk. He also said Chinese banks have a pawnshop mentality, requiring collateral before lending, unlike Ant, which was on the verge of going public, which uses algorithms to assess creditworthiness. Mr. Ma’s criticisms were correct, but he angered the powers that be. Even though the shares in Ant Financial’s initial public offering were 870 times oversubscribed, the Shanghai Stock Exchange effectively canceled the IPO in early November. Alibaba shares have fallen by more than a third since then. Ouch.
Never bite the hand that feeds you. Back in the days when Alibaba was private, Ma took advantage when Chinese regulators and the Chinese central bank forced a split from their payment system, Alipay, essentially taking value away from existing Alibaba shareholders, such as Yahoo and SoftBank, and giving it to Chinese investors. It was theft of money.
Killing Ant’s IPO likely hurt the company’s ability to raise capital. It was a stupid decision given how fickle world markets are when it comes to government control. Have you ever wondered if capitalism and communism / authoritarianism are compatible in the long run? We discover.
The purge continues. Food delivery company Meituan has been fined $ 1 billion for abusing its market position. Rideshare leader Didi Global has been warned to delay its US IPO due to cybersecurity concerns. It went public anyway, at $ 14, and then the Chinese State Council announced new rules and an overseas listing investigation. Didi stock is now below $ 9.
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