Stop, Look, And Listen Up

Image source: Krakenimages.com, BOYDTRIPHOTO - Shutterstock Jack Ma/Natalie Behring - Flickr

What's going on?

The Chinese and Hong Kong stock exchanges announced on Tuesday they’ve suspended Ant Group’s much-anticipated initial public offering (IPO) (tweet this).

What does this mean?

Ant Group – China’s leading mobile payments firm – had already raised $37 billion from institutional investors, and it was all set to list its shares on both exchanges this Thursday in what would’ve been the world’s biggest-ever IPO.



That is, until Chinese regulators asked to meet Ant Group bosses. See, while the company had already flagged that the IPO would have to navigate certain regulatory risks, this summons might’ve been one risk too far: both stock exchanges hit the pause button, pointing to as-yet-unspecified regulatory changes.

Why should I care?

For markets: Quite the entrance. 


This will sting: there’s been so much demand for Ant Group’s shares among institutional investors that the company stopped taking orders sooner than expected. That demand was partly because Chinese investment managers see the shares as a must-have, but also because its stock will likely get another boost when it joins the major stock indexes. The investment funds that track those indexes will, after all, immediately buy in too – and that’s to say nothing of all the retail investors who want its shares. Little wonder, then, why some investors thought Ant Group’s share price might’ve doubled when it “went public”.



For you personally: Tread with care.


It’s worth keeping in mind that a stock’s rise on the first day it’s traded – which is an average of 18% in the US – mostly benefits the major investors who bought in before the stock became publicly available. That said, it’s not particularly easy to buy new shares before they trade publicly – and even if you get in the moment they do, 60% of IPOs end up trading below their initial price five years down the line anyway.

 

Originally posted as part of the Finimize daily email.

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