Tuesday, March 2nd, 2021
Frustration instead of wealth
Employees mad at financial giants Ant
The plan sounded tempting: employees of the Chinese fintech Ant are paid with shares in order to silver them in the gigantic IPO. It is stupid, however, that the authorities are pulling the emergency brake. The Ant boss tries to calm the staff down.
The IPO of the payment service provider Ant, which was canceled at short notice by China's financial regulators, frustrates numerous employees. The reason: Many of the more than 16,000 employees had received share-based compensation. They wanted to make money by going public. But nothing will come of it in the foreseeable future. Some of them had already bought cars or apartments on credit – and are now in trouble.
In view of the anger among the employees, the Ant boss promised that the company would eventually go public. The group will find ways so that employees can turn some of their shares into cash.
However, there are two major problems with this. It is completely unclear when the company will go public. And even if that happens, the move will most likely be much less lucrative than originally planned. The announced gigantic IPO in Hong Kong and Shanghai would have valued Ant at the equivalent of $ 315 billion – that would be the largest IPO in history. But nothing came of it. Last November, the Chinese authorities surprisingly pulled the emergency brake. Because the wheel that fintech is turning on the credit market has become too big.
Ant had always presented itself as a technology company, but increasingly behaved like a bank – with the associated risks. Within just a decade, the subsidiary of the online giant Alibaba had risen to become the largest fintech company in the world with the mobile payment service Alipay, which is popular in China. It also offers loans, insurance, and asset management online today.
Ant has to shrink
Before Ant is allowed to go public, the business will be restricted by new regulations. Riskier activities need to be scaled back, which is likely to affect growth and profitability. The IPO should therefore be a few sizes smaller. In order to reassure the employees, Ant will therefore probably buy back employee shares. At what price, however, is completely unclear.
Coveted Ant employees are already switching to the competition. Because there the stock options are worthwhile. The price of rival Tencent has risen by 16 percent in the past four months, and that of e-commerce specialist Meituan by 25 percent. And Kuaishou has gained more than 170 percent since going public in February.
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