Alibaba's financial subsidiary may fall in price by half after the failure of a record IPO

After China's regulators suddenly suspended Ant Group's record IPO, the value of Alibaba's financial subsidiary could drop by $140 billion, Bloomberg writes citing experts. If forecasts come true, Ant will cost even less than in 2018, when it raised funds from the largest investment funds, including Warburg Pincus, Silver Lake, Temasek Holdings.

According to the American analytical agency Morningstar, the fall in the value of the fintech giant by half will be associated with tightened regulation. According to the draft, online platforms will have to independently fund at least 30% of loans and not issue loans in excess of 300,000 yuan.

Now the company directly issues only 2% of loans, and the rest is covered by banks and other similar sources. Thus, to support outstanding loans of nearly 1.8 trillion yuan, Ant will have to find 540 billion yuan.

Morningstar believes that Ant Group's valuation could fall by 25% to 50% if the pre-IPO equity-to-book value ratio declines to the level of the world's leading banks. Now Ant shares are valued at 4.4 times their book value, and in banks - only 2 times. According to the head of financial department of Aletheia Capital in Singapore, Ant's new value will be in line with the cost of some more qualified banks. A spokesperson for the fintech company itself declined to comment.

The current situation means not only a decrease in profits for investors from the proposed IPO, but also runs counter to the plans of the company itself to expand international business and take the fight within China with one of the main competitors - Tencent holding - to a new level.

• Ant Group was supposed to go public on November 5, 2020. However, on November 3, exchanges postponed the placement, which was supposed to be the largest in the history of the world and reach $ 34.4 billion. Now the record remains with the oil company Saudi Aramco - $ 29 billion.
• Earlier, FT sources also said that the placement could be postponed by at least 6 months, and the company's valuation could be less than half of the current one.

Read more about how the most expensive fintech in the world appeared and why the Chinese authorities thwarted the deal, The Bell tells here and here .