Chinese regulatory probe delays approval for the IPO of Alibaba's financial arm Ant Group

Ant is seeking a dual-listing in Shanghai and Hong Kong as soon as this month and needs CSRC approval for both listings

Alipay logo is pictured at the Shanghai office of Alipay, owned by Ant Group which is an affiliate of Chinese e-commerce giant Alibaba. Photo: Reuters/Aly Song/File Photo

13.Oct.2020 14:10 BRT
UPDATED 14:23 BRT

The delay in CSRC approval has forced Ant to postpone a hearing with the Hong Kong stock exchange, the last part of the approval process for the Hong Kong listing;
The Shanghai exchange, in contrast, cleared the listing in 24 days, compared with roughly four months for most IPO candidates that obtained approval in September, according to public disclosures from the exchange.

China’s securities regulator is probing a potential conflict of interest in fintech giant Ant Group‘s planned $35 billion stock listing, delaying approval for what could be the world’s largest IPO, three people with direct knowledge of the matter said told Reuters.

The China Securities Regulatory Commission (CSRC) is looking into the role of Alipay, Ant’s flagship payment platform, as the only third-party channel through which retail investors could buy into five Chinese mutual funds investing in the IPO, sources told Reuters, speaking on condition of anonymity.

The arrangement sidelined banks and brokerages, the traditional route for retail investors to buy into funds. More than 10 million retail investors piled money into the five mutual funds when they were launched in late September, underscoring the marketing clout of Alipay.

The CSRC said in guidelines effective from Oct. 1 that mutual fund distributors should avoid conflicts of interest from selling products related to their other existing and potential businesses.

Sources said the probe was unlikely to derail the IPO, although it was unclear what its outcome might be.

It has already delayed Ant’s plans, however, as the company had hoped to get CSRC approval last month, and it has narrowed the window for the IPO ahead of the Nov. 3 U.S. presidential election, which could fuel uncertainty for global markets.

Ant declined to comment. The CSRC didn’t immediately respond to a request for comment.

Ant, a domestically incorporated affiliate of Chinese e-commerce behemoth Alibaba, is seeking a dual-listing in Shanghai and Hong Kong as soon as this month and needs CSRC approval for both listings.

The delay in CSRC approval has forced Ant to postpone a hearing with the Hong Kong stock exchange, the last part of the approval process for the Hong Kong listing, the people said.

The Shanghai exchange, in contrast, cleared the listing in 24 days, compared with roughly four months for most IPO candidates that obtained approval in September, according to public disclosures from the exchange.