Firms linked to Ant Group saw their stocks rise on Monday after news over the weekend that founder Jack Ma would relinquish control of the Alibaba affiliate once known as Alipay.
These jumps may seem like a paradox, as Ma’s near disappearance from public view is not exactly encouraging for Chinese entrepreneurs or foreign investors.
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However, as we have explored recently in a different context (Coinbase’s post-settlement stock bump), markets hate uncertainty — and Ma’s downfall had been lingering way too long for their taste.
As you may recall, things turned sour for Ant Group two years ago, when its IPO plans were cut short by Chinese regulators. What followed was a long period of turmoil not only for Ant, but also for its founder and Chinese fintech as a whole.
Now that Ma is officially out, is an IPO back in the cards? It’s not that simple. Some of this has to do with the specifics of Ant’s situation, but it’s more than that: Once an exit gets off the rails, and under current market conditions, it is just not easy to get back on track.
Case in point: Chipmaker Arm is no longer aiming to go public until later this year. Its owner SoftBank is looking to relist the company after Nvidia gave up on its takeover, but political and economic turmoil make 2023 waters hazardous to navigate. Remind you of anyone? Let’s take a look.
2023’s Ant
Abiding by Beijing’s wishes means that Ant is not the same company as it once was — and its valuation reflects this fact.
“While Ant fetched a valuation of $280 billion pre-IPO, based on its stock pricing, the myriad regulations imposed over the past two-plus years mean it’s now worth a fraction of that, as it’s now more ‘fin’ than ‘tech,'” Bloomberg noted.
How much Ant is worth nowadays is still open to debate. That’s often the case with private valuations, but the range of recently reappraised estimates is particularly wide in Ant’s case, from $70 billion per Fidelity to $151 million per BlackRock.
A multibillion-dollar valuation could still support an IPO, though. But there are other hurdles popping up — the main one being regulatory. In short, the company needs to obtain a financial holding company license. Without an official and unofficial green light for this from Chinese authorities, there is no chance for Ant Group to go public, whether that’s in Shanghai or Hong Kong.
Which stock exchange it chooses will also impact its timeline to exit, but in both cases, there will likely be delays due to Ma’s departure. As Reuters pointed out, “China’s domestic A-share market requires companies to wait three years after a change in control to list. The wait is two years on Shanghai’s Nasdaq-style STAR market, and one year in Hong Kong.”
Either way, signals from regulators on whether they approve of an Ant IPO have been mixed, Bloomberg said. Not to mention that there’s also a potential $1 billion fine looming over the company.
All of the above likely explains Ant Group’s stance on the matter: “Ant Group has been focusing on its business rectification and optimisation, and does not have a plan for an IPO,” a spokesperson told Reuters on Sunday.
SoftBank wasn’t as open in discussing Arm’s public listing prospects this week, declining to comment on an FT exclusive whose sources made interesting comments.
Arm in dual-listing discussions?
Citing “two people familiar with the matter,” the FT reported that U.K. Prime Minister Rishi Sunak met last month with SoftBank founder Masayoshi Son and Arm CEO Rene Haas, who took over from predecessor Simon Segars last February.
The prime minister’s purpose, the FT said, was to “revive efforts” for a London listing to be part of Arm’s IPO plans. While SoftBank has its eyes set on New York, Sunak and the London Stock Exchange are reportedly hoping that a dual listing could still be a possibility — and are lobbying for it.
Sunak’s rumored attempt isn’t a first; former PM Liz Truss and Chancellor Kwasi Kwarteng were said to be planning a “last-ditch bid to persuade SoftBank to list Arm in London” last September. But the country’s political instability made these efforts inconsistent at best.
Convincing SoftBank to opt for a dual listing won’t be easy. According to the FT’s sources, British lobbying efforts face an uphill battle “because of the higher cost and complexity of such a move.”
While the Cambridge-based chip designer once had a primary listing on the LSE and a secondary one on Nasdaq, a lot has changed since then. The biggest event, of course, was Nvidia’s failed attempt to buy Arm for $40 billion. After the U.S. and the U.K. both objected to the merger, the American company threw the towel in February.
While a relisting of Arm is clearly in the works, it might not happen just yet. As we mentioned earlier, the company itself said as much in November. And once again this week, sources told the FT that “SoftBank was now likely to wait until later in the hope that market conditions improve.”
Unlike Ant Group, Arm might still be worth at least as much as its former price tag. But let’s keep in mind that SoftBank was once said to be looking for a $60 billion IPO valuation for the company, for which it paid $32 billion in 2016. In this context, it likely makes sense for Arm’s owner to delay its attempt.
Parallels between Ant Group and Arm aside, the companies are not alone in having to wait for more favorable weather. With more than a thousand unicorns potentially hoping for a public exit, the question becomes less who will IPO and where, but when the IPO window will reopen.