Investors are now going soft on Ant Group, once valued in excess of $300 billion, following stricter Chinese regulations and the cancellation of its November 2020 initial public offering (IPO) by the government, The Wall Street Journal reported on Monday (May 3).
Overall, global investors have now lowered expectations regarding Ant Group’s prospects for revenue and profit. At Fidelity, for example, a “fair value committee” is responsible for determining unlisted companies’ value of securities, according to the documents for its funds, per the news outlet.
The committee uses baseline criteria — anticipated cash flow, the market performance of rivals — in figuring out the share value of a private firm.
Based in Boston, Fidelity is one of many global investors and asset managers that backed Ant Group in 2018. Regulatory filings in February indicated that Ant’s valuation was $144 billion, the Journal reported.
Murray Grenville, CEO of Sterling Valuation Group, told WSJ that determining the value of unlisted companies’ shares involves a “tremendous amount of judgment.”
Last month, Ant Group’s valuation was more than $200 billion based on its 2020 balance sheet. Before its IPO was halted by regulators, Ant was valued at more than $315 billion. The proposed dual listing in Shanghai and Hong Kong was expected to be the biggest IPO worldwide.
The Chinese government last month put pressure on officials to determine why Jack Ma’s Ant Group was allowed to proceed with an IPO. The probe is focused on the regulators who gave Ant’s IPO the go-ahead. Beijing is also investigating which companies were to benefit from the IPO.
The crackdown by officials in China prompted Ant Group CEO Simon Hu to exit the company. He was CEO since 2019. He was replaced by Executive Chairman Eric Jing, who will juggle the dual role.
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