China would have held the world record for the largest initial public offering had Ant Group listed in November 2020. At the time, the financial services industry planned to raise $37 billion, valuing it at around $315 billion. of dollars. Alibaba’s payment subsidiary may never return to this assessment. But he still holds the key to stemming outflows from Chinese equities.
Conflicting reports of Ant’s continued listing have triggered wild swings in U.S.-listed Alibaba shares over the past two months. The Chinese regulator has denied rumors that it has started talks about reviving the deal.
The volatility brings back memories of 2020, when Ant’s delisting marked the start of a two-year crackdown on the tech sector and a sharp sell-off in stocks. Hong Kong-listed shares of Alibaba have nearly halved over the past year. At 15 times forward earnings, they are trading lower than local counterparts also targeted by Beijing’s crackdown, such as Tencent.
Ant’s valuation will now fall short of its previously projected total of $315 billion in 2020, which implied a multiple of 30 based on forward earnings. Since then, the global tech selloff has slashed valuations, including that of US peer PayPal, whose share price has also crashed in the past year, now trading at 18x earnings .
For Alibaba, a listing in China had been one of the few options left to boost its struggling stock price. Further lockdowns and more Covid outbreaks in China can only hurt the e-commerce giant’s prospects. A listing of Ant would have been helpful, given that it has about a third stake in the company.
When it comes time for a listing, a price discount would be needed to attract investors to Ant. The abrupt delisting two years ago forever changed the way investors view the regulatory risks for Chinese equities. But the symbolic boost the listing would give Chinese stocks would make a lower price bearable.
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