Beijing’s unease over online lending puts Lufax listing in limbo
We’ll send you a myFT Daily Digest email rounding up the latest Financial services news every morning.
Lufax, one of China’s largest peer-to-peer lenders and online wealth managers, has delayed its highly anticipated initial public offering and may push back the listing until next year, several people familiar with the matter said.
The delay of the flotation for regulatory reasons will put a damper on Asia’s equity capital markets this year after Ant Financial Services also decided to hold off its listing until, at the earliest, the last quarter of 2018, the FT reported last month.
Lufax, which is controlled by Ping An Insurance, was valued at $18.5bn after a round of fundraising in early 2016. Ant, an affiliate of Chinese e-commerce giant Alibaba, was last valued at $60bn. The listing was projected to raise up to $5bn and was one of most followed capital market events of 2017.
Lufax declined to comment.
While the companies never sent official timelines for the listings, the two IPOs, as well as that of Zhong An Online Property and Casualty Insurance, were watched by many bankers hoping for a blockbuster Asian IPO calendar in 2017, following a lacklustre 2016.
Global IPO volume fell 32 per cent in 2016 to $133bn, the lowest activity since 2012, according to Dealogic. Last year’s largest public listing globally was Postal Savings Bank of China’s $7.5bn flotation.
A lack of clarity from regulators on China’s online wealth management industry has held back the Lufax IPO, several people familiar with the company said.
“For Lufax, the regulation is like a time-bomb,” said one banker familiar with the company’s situation. “Nobody knows what it’s going to do.”
China’s online finance industry has been hit with a wave of regulatory change this year.
The market has been rocked by billion-dollar scams over the past two years that have prompted ordinary people to take to the streets in protest. More than half of the country’s peer-to-peer lenders, or online platforms that connect lenders and borrowers outside of the banking system, are expected to be pushed out of the market by new rules.
One incident in particular has led to increased uncertainty for companies such as Lufax that sell investment products on online platforms.
In December, a Chinese company called Cosun Group defaulted on $45m in high-yield bonds that were sold on one of Ant Financial’s online platforms. Documents used in the distribution of the bonds were later found to be fake.
While the case presented no systemic financial risk, it led to questions about who takes responsibility for products sold on third-party platforms such as Ant’s. China’s financial watchdogs have grown increasingly sensitive to cases where retail investor cash is at stake, and new rules are expected to lead to increased scrutiny for financial products marketed to retail investors online.
Lufax management was thinking about the impact of the new regulation when it put its IPO on hold, said people close to the group.
Ant Financial’s IPO was also put on hold this year because it has yet to receive regulatory approval for the transaction, several people familiar with the deal said last month. To list overseas and take on foreign ownership, Ant would require a waiver from Beijing.
Ant owes its current structure as a Chinese company to the controversial spin-off of its core business, online payment platform Alipay, by founder Jack Ma in 2011.
The move, which triggered a public spat with Yahoo, a big Alibaba shareholder, was necessitated by new Chinese government rules restricting foreign ownership of third-party payment services, which meant Alipay had to change its ownership structure.
Get alerts on Financial services when a new story is published