Billionaire tech boss Jack Ma’s firm Ant Group must repay $167bn (£128bn) to more than 1.5 million investors after China’s shock decision to stop its blockbuster stock market float.
A tidal wave of Hong Kong and Shanghai retail investors piled into the record $37bn listing of payments business Ant, which was due to go public on Thursday before regulators stepped in earlier this week.
The payback to prospective shareholders is expected to be the single biggest refund in history. It includes cash returns for both successful applications to buy shares, and those who missed out because the listing was oversubscribed.
Swathes of ordinary people used their savings and borrowed heavily for what many believed to be a once-in-a-lifetime investment opportunity amid raging hype around the stock.
Mr Ma’s other firm, e-commerce behemoth Alibaba, floated in New York in 2014 and shares have since more than doubled in value.
Investors who lost out were stunned by Chinese authorities’ decision to intervene, which came after a meeting with Mr Ma. Watchdogs have told Ant it must comply with increased capital requirements brought in at the start of this month, amid concerns about massive high-risk lending.
Vincent Tse, a 21-year-old Hong Kong resident and Cambridge University student who applied for 2,000 shares worth around HK$160,000 ($20,640) using earnings from a part-time job, said: “I feel like I made a very wrong decision.
“This situation really reveals a deep problem in the Chinese market and shows a lack of experience in holding such a large initial public offering.”
Mr Tse said that he would no longer invest in Ant and instead intends to put him money in US, European or Japanese stock markets.
Ant said Hong Kong investors would get the first batch of payouts on Wednesday with a second on Friday.
The Shanghai stock exchange suspended Thursday’s planned share sale with just 48 hours notice. Ant also pulled out of its planned dual listing in Hong Kong.
Mr Ma had been due to raise a record $35bn with the float of Ant, which owns payments app Alipay, breaking the previous record set by oil titan Saudi Aramco last year.
However, Chinese regulators have increasingly expressed concern at the vast loan books being built up by largely unregulated financial technology companies such as Ant.
On its Alipay app, consumers can send money or make payments, take out so-called microloans and invest in wealth management products. Ant has lent out more than $60bn and manages $500bn of account holders’ wealth.
A Chinese foreign ministry spokesperson said the suspension of the float was aimed at securing “the stability of capital markets and to protect investors’ interests”.
However, analysts said the decision to block Mr Ma’s crowning achievement days before suggested discontent between the ruling Communist Party and one of China’s richest men.
Mr Ma has had an increasingly fractious relationship with regulators, accusing them of holding back financial innovation.
Richard Windsor, an independent analyst, said Chinese regulators have known for “months or even years” about Ant’s products, suggesting they had picked the moment “to remind Jack Ma who really is in charge”.
The fresh restrictions come as part of a wider crackdown by the Chinese government on Ant, which Bloomberg reported includes discouraging lenders from using Ant’s services.
An Ant spokesman has said that suggestions that banks will stop using it are unsubstantiated.
Shares in Alibaba fell by 8pc after the suspension, and Mr Ma’s net worth dropped by $3bn to $58bn. Ant was spun out of Alibaba, which still owns around a third of the business.
The length of the delay to Ant’s float was unclear late on Wednesday.
Richard Clode, of Alibaba investor Janus Henderson, said regulators are concerned that online lending could pose a risk to the financial system. However, he added: “Unfortunate timing, but we would expect this to be resolved.”
Completely blocking the float of Ant would be a major blow to Shanghai’s nascent Star market, a challenger exchange set up to attract domestic technology companies and rival the US Nasdaq.
Yang Wang, a Hong Kong based analyst at Counterpoint Research, said: “We expect all parties will continue to work to address the regulatory requirements.”