Months following the Ant Group’s sudden suspension of its highly anticipated dual listing, China’s financial technology companies were facing difficulties trying to go public in the mainland, according to analysts who spoke to CNBC.
China’s Fintech Companies Facing domestic Listing Roadblocks
EY’s Asia-Pacific IPO leader, Ringo Choi said few fintech sector firms had managed to list on mainland exchanges in Shenzhen and Shanghai.
Choi told CNBC that for financial technology, one could see that some of the largest one(s), if they were competing with the bank or insurance company, they would have a hard time.
The China Securities Regulatory Commission last Friday announced updated guidelines for companies that sought listing on Shanghai’s STAR market. The market is officially called the Shanghai Stock Exchange Science and Technology Innovation Board and is styled around the Nasdaq tech board.
According to one of the guidelines, financial technology companies were barred from STAR board listing. According to the CSRC release, firms engaged mainly in financial services and investment businesses and real estate were prohibited from Science and Technology Innovation Board listing.
According to commentators the latest development had introduced yet another hurdle for Chinese fintech companies seeking listing on the mainland.
The development follows weeks after JD.com dropping plans for the listing of its financial technology business on the STAR market.
According to commentators, the current IPO scenario stood in sharp contrast to the situation of less than six months ago, when several Chinese start-ups had plans for domestic listing. The highly anticipated Alibaba-affiliate Ant Group’s public debut was among the listings. It was set to become the largest IPO globally.
The group’s planned listing set to happen in both Hong Kong and Shanghai was suddenly shelved days ahead of the debut following Chinese regulators summoning its controller and founder, Jack Ma and top executives for questioning.
According to commentators, the unexpected suspension came as a sharp turning point in the stance Beijing had adopted toward its giants in domestic technology, including fintech firms, that had enjoyed unhindered freedom to grow.
According to Bruce Pang, head of macro and strategy research at China Renaissance Securities (Hong Kong) who spoke to CNBC, the sentiment for this sector faced some questions.
He added financial technology firms were now looking toward Ant’s business rectifications as an example that could be followed by others that were seeking mainland listing.
Chinese regulators, earlier in April had ordered Ant which ran the hugely popular mobile app Alipay in China to revamp its business.
According to a Reuters report, over the weekend, the company was exploring options for founder Ma’s giving up control and divesting his stake, which was swiftly denied by Ant as baseless and untrue in its official Twitter account post.
According to Pang, financial technology firms that currently faced a closed door in their attempts to raise capital on the STAR board might seek listings elsewhere.
According to analysts, the U.S. and Hong Kong continued to be viable options for Chinese fintech firms seeking alternative destinations for going public.
They cited the example of Chinese fintech firm, Lufax that had enjoyed a successful listing outside the mainland with a U.S. IPO in late 2020.
According to EY’s Choi, Chinese firms wishing to list in the U.S. would likely get a pass from the Securities and Exchange Commission in the U.S. if the companies as could meet the requirements full. They could even list on Hong Kong, where the process might be more stringent, but they still had chance to go public if they were able to meet the requirements.
However, concerns over potential delisting in the US might affect investor sentiment. Under a new law brought by the Trump administration, the SEC could stop the trading of securities that failed to clear its auditing process.