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Regulatory Holdups Slow Ant Group’s IPO Plans


A window is closing for Chinese financial-technology giant Ant Group Co. to pull off a record-breaking initial public offering ahead of the U.S. presidential election, as regulators in mainland China and Hong Kong have yet to sign off on the company’s plans to go public.

Ant, the owner of popular Chinese mobile-payments network Alipay and the world’s most valuable startup, in August filed IPO documents with stock exchanges in Hong Kong and Shanghai. The company could raise more than $30 billion in the concurrent offerings and earn a market valuation between $200 billion and $300 billion, The Wall Street Journal previously reported.

Hangzhou, China-based Ant, an affiliate of

Alibaba Group Holding Ltd.

BABA 2.62%

, was earlier targeting to list its shares in both markets by late October, according to investors who were briefed by bankers working on the sale.

Some company insiders had also wanted to complete the IPO before the U.S. elections on Nov. 3, to avoid running into potential choppy financial markets in the ensuing days and weeks, according to people familiar with the matter. Tensions between the U.S. and China have also been high, and could escalate depending on the election outcome.

Spokespeople for Ant have previously said there was never a formal timetable for its listing. A spokeswoman declined to comment Friday.

That is now looking unlikely, even though the Shanghai Stock Exchange in mid-September greenlighted Ant’s listing plans. The stock exchange of Hong Kong has yet to hold a hearing to determine whether the offering can proceed, and the deal also needs a signoff from the China Securities Regulatory Commission before Ant can start selling its shares on the mainland.

A woman used an Alipay QR payment code in a Freshippo supermarket owned by Alibaba Group Holding Ltd. in Shanghai last month.


Raul Ariano for the Wall Steet Journal

Ant will be the first Chinese company in a decade to list in both markets at the same time, and coordinating the two efforts is proving to be a complicated process. In Hong Kong, companies typically take about two weeks to go public from the time they launch their offering after getting a green light from the exchange.

Even though Ant’s dual IPOs will bypass the world’s largest exchanges in America, and the company has very little business in the U.S., worsening relations between the two countries have placed Ant in the crosshairs of potential attempts by the Trump administration to curb the company’s activities. Three major U.S. investment banks are among the sponsors of the Hong Kong leg of Ant’s IPO. 

The U.S. State Department recently proposed that Ant be added to the Commerce Department’s so-called entity list, which is designed to prevent companies from exporting sensitive technology abroad, according to a person familiar with the matter. News of the proposal was earlier reported by Reuters.

The entity list, in essence a trade blacklist, restricts the export, re-export or transfer of technology and other items that include weapons. Dozens of Chinese companies are already on the list, including telecom giant Huawei Technologies Co.

A year ago, Megvii Technology Ltd., a Beijing-based developer of facial-recognition technology, was among eight companies that were added to the list. Megvii, which Ant owns a minority stake in, at the time was preparing for an IPO in Hong Kong, which, like the Ant deal, was led by U.S. banks. 

The IPO was postponed after Megvii’s underwriting banks became lukewarm about the deal in light of the U.S. government ban, the Journal previously reported.

The Chinese fintech titan Ant Group—co-founded by Alibaba billionaire Jack Ma—is set to go public in what could be one of the largest listings ever. WSJ explains how Ant’s backbone service, Alipay, has revolutionized payments and investing in the world’s most populous country. Photo Composite: Crystal Tai

It is unclear what security justification the U.S. would have for adding Ant to the entity list, but one of the concerns raised by administration officials, lawmakers and analysts has been Chinese companies’ potential access to personal information of Americans. Ant’s Alipay doesn’t serve U.S. consumers.

An interagency panel of representatives from the Departments of State, Defense, and Energy—and chaired by a Commerce officer—must consider the proposal within 30 days of its submission. A majority of representatives have to approve the proposal for Ant to be added to the entity list.

Most of Ant’s business is in China, where Alipay has more than one billion users and handled 118 trillion yuan, equivalent to $17.6 trillion, in payment transactions in the 12 months to June.

Last year 5.5% of Ant’s 120.6 billion yuan in revenue came from abroad, according to its listing prospectus. Ant earlier scaled back ambitions to expand in the U.S. after a failed $1.2 billion bid for MoneyGram International Inc. that was blocked on national-security concerns in 2018.

In 2016, Ant acquired Kansas City, Mo.- based EyeVerify Inc., which provides biometric verification technology, for an undisclosed amount.

In the U.S., Alipay has tie-ups with

Walgreens Boots Alliance Inc.

and other retailers to provide its network as a payment option for Chinese shoppers with Alipay digital wallets that are linked to their bank accounts in China. It can’t be used by non-Chinese citizens outside of China.

Ant hasn’t been notified of any State Department proposal, and the company hasn’t had any interaction with U.S. government officials on the issues, according to people close to the company.

Martin Chorzempa, a research fellow who follows China’s financial sector at the Peterson Institute for International Economics, said that unlike the addition of China’s Huawei and its subsidiaries to the blacklist, there are no accusations he is aware of that Ant has violated any U.S. laws.

“This fits into the general pattern of wanting to look really tough on China by taking symbolic actions that don’t have a strong negative effect—but make a lot of noise,” said Mr. Chorzempa.

Shaun Wu, a Hong Kong-based attorney at Paul Hastings LLP, said the Trump administration has increasingly shown that it is willing to impose tough restrictions or even prohibitions on Chinese tech giants, in particular.

But, there is no prohibition on U.S. investors buying shares in companies that are on the entity list, said Mr. Chorzempa, adding he doesn’t believe the threatened listing will deter them. Ant’s coming IPOs have already drawn substantial interest from big investors from the U.S. to Asia, according to people familiar with the matter.

Banks handling the sale have been in discussions with institutions that plan to subscribe for shares in the IPO, and five big asset managers in China recently closed new mutual funds that could invest as much as six billion yuan in the Shanghai leg of the offering. Millions of Alipay users invested in those new funds.

—Xie Yu contributed to this article.

Write to Stella Yifan Xie at [email protected], Jing Yang at [email protected] and Ian Talley at [email protected]

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