Last week, the business’s massive Jack Ma appeared to be trying to become China’s wealthiest man with the launch of his new high-tech venture, Ant Group. The industry icon as the person behind Alibaba (HKG:9988), the world’s largest e-commerce platform, is set to sell stocks in a new company worth around $34.4 billion (£26.5 billion) on Thursday, making its biggest stock market debut on record. That was until Chinese authorities immediately stopped listings until they intervened, citing the “major issues” of the project.
The decision to halt the launch sent shockwaves through the rest of MA’s portfolio, with Alibaba’s stock price falling 8.1% in New York on Tuesday and another 9.6% in Hong Kong on Wednesday. Both drops wiped out $760 billion from the company’s value, while the proposed stock of ANT Group increased MA’s own net worth to more than $800 billion.
“Not only was this deal cleared for takeoff, the wheels were literally off the ground,” Drew Bernstein, co-management partner of Marcum Bernstein & Pinchuk, told BBC News last week.
On Monday morning, Bloomberg reported that China’s decision to halt launch could “reduce the value of the fintech giant by up to $140 billion,” citing an analysis by Morning Star (NASDAQ: Morne). The new, more stringent regulations imposed by Chinese authorities “may allow Ali to force more capital to lend and seek a national license to operate nationwide.”
Bloomberg warns that if ANT’s value is halved at $280 billion, it will only estimate it is an estimate, but it will drive a company that is even less than it was worth two years ago.
Morningstar analyst Iris Tan told Bloomberg that if pre-IPO prices and book ratios drop to “top global bank levels,” ANT could face a slip of 25% to 50% of its rating. In fact, that means Ant can see its valuation being reduced by around $140 billion.
Currently, ANT’s stock price is valued at “4.4 times the book value,” while it’s only twice as high at comparable global banks, TAN added.
Sanjay Jain, finance director of Singapore-based advisory firm Aletheia Capital, estimated Ant’s acquisition rate ratio could drop to “about 10 times the profits on loan, half of the previous targets allocated to the company.”
The new price is reportedly Citigroup Inc. (NYSE:C) is trading, as seen as Ali sinks from the initial high estimate, and Citigroup Inc. (NYSE:C) reportedly “DBS Group Holdings Ltd. (SGX:D05) has been traded about 12.6 times.”
One of the most appropriate comparisons is China Merchant Bank Ltd (SHA: 600036), which currently trades at around 10 times the annual revenue.
Bernstein wanted to highlight that MA would likely readjust his business and try to make his second market debut in the coming months.
“The company needs to be restructured a bit. Maybe commit more capital to the loan sector and apply for more licenses. They will then be able to return to the market.”
