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Nobody had more to lose from the suspension of the Ant float than the bookrunners, in particular the joint sponsors. They had closed books on a record deal that looked good not just for them and Ant but for the Greater China capital markets. There are many questions about what happens next: how should Ant be reshaped to revive the listing and who should share the blame for not responding to shifting regulatory sands?
Will nobody think of the underwriters?
Amid the fallout from the halted Ant Group IPO there have been many constituencies to consider: Ant founder Jack Ma; the Ant Group staff; the regulators and the Chinese Communist Party; the stock exchanges in Shanghai and Hong Kong; and the baffled would-be investors, local and international, retail and institutional.
But nobody is more nonplussed than the bookrunners, who perhaps had more to lose than anyone from all this.
The banks were looking forward to being part of a landmark; not just the biggest-ever IPO but a symbol of China and Asia rising in world markets, where record-breaking sums could be raised without troubling a US or European exchange.
This was to be a deal that made a national contribution, a way to make a big splash in only the second year of operation of Shanghai’s Science and Technology Innovation Board, or Star Market, a pet project of president Xi Jinping aimed at creating a Chinese Nasdaq.
Internally, Ant staff were calling the IPO “Project Star” in recognition of its importance and their pride in being a part of it.
The banks were proud too. And they were also going to make a ton of money.
Ant was a tightly priced deal, as the jumbos tend to be. Rather than the 2% fee commonplace in Hong Kong floats, Ant disclosed that the 24 banks in its underwriting syndicate there would earn 1% of the IPO’s proceeds.
But on a deal like this those are big numbers. At the time the deal was shelved it had already raised about $34.4 billion equally between Hong Kong and Shanghai, with the potential of a 15% greenshoe in both locations. So that 1% equates to HK$1.537 billion ($198.25 million) if the greenshoe had been exercised – and that’s just the Hong Kong side, without considering the Star board fees in Shanghai.
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