Hey Global Investor, here’s what you need to know before the US markets open.
Market Snapshot 📈
S&P 500 (Thursday Close) 3,703.06 +13.05 (0.35%)
NASDAQ (Thursday Close) 12,804.73 +33.62 (0.26%)
FTSE 100 (5 PM IST) 6486.76 -8.99 (0.13%)
NIFTY 50 (Today’s Close) 13,873.20 +123.95 (0.90%)
USDINR (5 PM IST) 73.69 (1 Year +2.94%)
How Not To “Ant”agonize Regulators?
Alibaba and its affiliate Ant are finding themselves in increasingly hotter water as regulators evaluate the firm’s future based on perceived monopolistic practices and corporate governance issues.
Background: Jack Ma in China is synonymous with the kind of rags to riches story we associate with. The company he had founded – Alibaba – had the largest IPO in world history back in 2014. Its FinTech and online payment platform Alipay was founded in 2014, spun off in 2010, and rebranded as Ant Financial Services in 2015.
Over the last 17 years, Ant has grown from a PayPal-like service to controlling more than half of China’s online payment and banking services. Ant and Alibaba are so intertwined with the daily life of Chinese citizens today, that it’s hard to imagine how things got done without them!
Ant’s proposed IPO in November was scuttled at the last minute when China’s regulators raised concerns about corporate governance and the company’s disdain towards regulatory requirements. On cue, the Shanghai and HK stock exchanges stopped the IPO from going forward.
What is Happening? Over the weekend, the People’s Bank of China ordered Ant to rectify the company’s lending, insurance, and wealth management services, while stopping short of asking for a complete breakup. In addition, Ant has been at the receiving end from other regulatory bodies – the State Administration for Market Regulation and the China Banking and Insurance Regulatory Commission. They are currently evaluating which businesses Ant should cede control of.
Ant, for its part, is meeting with regulators on daily basis and is setting up a special team to create proposals and timelines to overhaul its operations. Still, the regulators have kicked off investigations into Ant’s monopolistic practices and how it may have hurt the interests of hundreds of millions of consumers.
All of these developments have hurt the company where it matters most. Alibaba has lost $200B in market value since November. Jack Ma has been advised by the government to stay in the country. Ant’s private equity investors who were counting on a huge windfall from the IPO – Silver Lake, Warburg Pincus, Temasek, GIC, Carlyle Group – are now looking at a significant write-down. This sudden change of fortune is attributable to Ma’s comments back in October that rubbed the regulators the wrong way, when he lamented in public, the inefficient banking and financial ecosystem in the country.
Market Reaction: On Thursday, BABA closed at $222, down 13.34%. The stock is down 1.23% before hours on Monday.
Company Snapshot 📈
BABA $222.00 -34.18 (-13.34%)
Analyst Rating (56 Ratings) BUY 96% HOLD 4% SELL 0%
- Happy Ending?: Dow futures indicate 200-point gain as Wall Street enters last week of 2020 (DJIA +0.23%)
- Good to Go?: UK expected to approve Oxford-AstraZeneca Covid vaccine this week (AZN -0.51%)
- Big Relief: Trump signs Covid relief and government funding bill days after he suggested he would block it
Later Today 🕒
- Carnival Corp Earnings (CCL)
- Before Market Open: SINA Corp (SINA)
Fun Fact of The Day 🌞
The name December comes from the Latin decem for “ten”, as it was the 10th month in the Roman Calendar.