Ant Group Offers Refund for Exclusive Investment Funds That Prompted Accusations of Underwriting Own IPO

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Chinese fintech giant Ant Group has announced that it is willing to provide refunds for subscribers to investment funds sold exclusively via its Alipay platform that had triggered conflict-of-interest concerns just prior to the suspension of the company’s record-sized IPO.

On 10 November Alipay announced via Chinese social media that it would provide a month-long optional withdrawal period for five investment funds it sold under exclusive terms.

From 23 November to 22 December 2020, investors will be able to withdraw from the investment funds based on the net value of their holdings, with Alipay stating that this would “better satisfy the liquidity needs of investors.”

25 September saw the exclusive sale via the Alipay platform of five hybrid securities investment funds with a combined value of 60 billion yuan (approx. USD$8.9 billion) and lock-up periods of 18 months, by a raft of leading Chinese fund managers including E Fund Management Co., China Asset Management, Penghua Fund Management, China Universal and Zofund.

Critics raised concerns in October that the exclusive sale of investment funds via the Alipay platform could enable Ant Group to “underwrite its own IPO,” given that some of the funds were earmarked for investment in Ant Group shares.

According to 21st Century Business Herald the five fund companies executed strategic investor share subscription agreements with Ant Group, with plans for 10% of the assets of each fund to be allocated to new shares in Ant. 10% is the maximum that each of the funds is permitted to allocate to a single share. 

The Herald report further states that during the sales of the funds Ant Group used phrases such as “invest in Ant” (投资蚂蚁) and “participate in Ant’s listing” (参与蚂蚁上市). 

Ant Group’s planned IPO on the Shanghai and Hong Kong bourses was suspended at the start of November, with domestic analysts pointing to heightened regulatory scrutiny of online financing as a key factor.

The listing scheduled for 5 November was expected to net a record-breaking USD$36 billion. Prior to its suspension the Ant Group IPO drew an unprecedented $3 trillion in bids from retail investors in Shanghai and Hong Kong.

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