Ant Group's New Valuation Underwhelms, IPO Remains Stalled

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Mar. 16 2021, Published 11:07 a.m. ET

Jack Ma's companies have been through the ringer in the past year (given that he's the richest person in China). Alibaba stock (NYSE:BABA) has sunk 28.03 percent since October 2020 due to issues with the Chinese regulatory arm. Ma's fintech company, Ant Group, can't even seem to get its own IPO off the ground.

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Given the obstacles, Ant Group's latest valuation suggests that the company might be experiencing a downfall.  

Ant Group's valuation shrunk post-IPO claims.

Global investors for Ant Group have valued the company at $220 billion. This is based on its fiscal performance over the course of 2020.

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The valuation comes after Chinese regulatory officials halted the Ant Group IPO from moving forward. Ant Group's most recent fundraising round occurred in 2018. At the time, it was valued less than $220 billion. However, by the time the projected IPO rolled around, the company sought a $315 billion valuation. Ant Group was on track to roll out the largest IPO in global history worth $37 billion.

Perhaps this just goes to show how overvalued the estimation was or maybe it's evidence that IPO valuation in and of itself is an imperfect science that's more arbitrary than we thought. Either way, this new valuation adds a layer of complexity to the already struggling IPO. When (and if) the company is finally able to go public, it probably won't have the same investor gusto as before due to a lack of corporate transparency. 

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Ant Group has to keep its IPO tabled until it restructures.

Ant Group expected to be public by November 2020, but that isn't how the cookie crumbled for Ma's fintech umbrella. Alipay, Mybank, Antchain, and Ant Forest are all a part of Ant Group. At the time of the IPO, the company was designated as a tech firm. However, the Chinese government said that it needed to restructure itself as a financial firm. Financial firms usually incur lower valuations than tech firms, which is probably why Ma was trying to do the workaround in the first place.

As a tech firm, Ant Group was able to raise $150 billion in venture capital all at once (the world's largest chunk of VC change). Now, the future looks different, but the company has yet to come up with an official restructuring plan that satisfies regulators. One thing's for sure, though: With a more modest valuation for the company and the potential IPO, Ant Group's latest institutional investors may or may not reap the return they were seeking. 

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Ma's vested stakes are going public in the meantime.

Recently, Megvii, a Chinese facial recognition and AI software company, announced that it's going public. Megvii is taking the CDR (Chinese depositary receipt) route instead of using traditional stocks. This is a way to make stakes more available to overseas investors without doing a dual-listing like Alibaba. Ma's e-commerce company backs Megvii with a minority stake. 

While Ma's own Ant Group works to pick up the pieces of its almost-IPO, he continues to expand his reach through other ventures. However, the Ant Group CEO stepped down last week and it isn't clear what will happen with the fintech firm. 

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