How Badly Will the Ant Group IPO Debacle Hurt Alibaba Stock?


Alibaba's (NYSE:BABA) stock recently tumbled after Chinese regulators derailed the public debut of its fintech affiliate Ant Group. Alibaba holds a 33% stake in Ant, which owns the digital payments platform Alipay.To get more latest ant group news, you can visit shine news official website.

Ant's stock listing in Shanghai and Hong Kong was suspended after Jack Ma, Alibaba's co-founder and one of Ant's top investors with an 8.8% stake, delivered a controversial speech at a government forum on Oct. 24.

Ma criticized China's financial regulators, claimed many of the country's banks operated like "pawn shops" with their collateral standards, and he declared that China needed a new financial platform that would extend credit to lower-income customers who lacked sufficient collateral.
Chinese regulators had already been scrutinizing the ability of Alipay and Tencent's (OTC:TCEHY) Tenpay, which hold a near-duopoly in China's digital payments market, to disrupt the country's mostly state-backed banking sector. Ma's speech seemingly angered those regulators, who then pulled the plug on Ant's IPO.

Ant was expected to be the world's largest IPO, with a valuation of over $300 billion. It was also set to be a defining moment for China's exchanges since Ant was exclusively listing the stock in China instead of the U.S.

But now, its collapse will cost its underwriters millions of dollars in fees, and a new IPO could take months to file. That's certainly dire news for Ant Group, Jack Ma, and investors seeking a piece of the action, but was Alibaba's stock unfairly punished for Ant's suspended IPO?
Ant's revenue rose 38% year over year to 72.5 billion yuan ($10.7 billion) in the first half of 2020. Within that total, its digital finance services revenue grew 56% to 46 billion yuan ($6.8 billion). Its net income rose 21% to 21.9 billion yuan ($3.2 billion).

At the end of June, Alipay served 711 million monthly active users (MAUs), and its app processed 118 trillion yuan ($17.4 trillion) in payments over the past 12 months. Tenpay, which includes WeChat Pay and QQ Wallet, served 940 million MAUs last year, according to a recent Ipsos survey.

Those growth rates are comparable to other hot fintech companies like Square (NYSE:SQ) and PayPal (NASDAQ:PYPL), which are both attracting big institutional investors as the rise of mobile payments, unpredictable macro headwinds, and low interest rates all make traditional banks less attractive.

Square went public five years ago, and its stock has risen more than 22 times from its IPO price. PayPal was spun off from eBay (NASDAQ:EBAY) as a separate company in 2015, and its stock has risen about 460% over the past five years. Many investors likely expect Ant to generate returns that are similar to those of those two fintech leaders, if not better.