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Illustration: Sarah Grillo/Axios

Jack Ma is brilliant. He's innovative. He's one of the world's richest men, and even has a lovely singing voice.

Driving the news: He also made one of the weightiest unforced errors in the history of global business, scuttling what was expected to be a $35 billion IPO for Chinese financial services company Ant Group.

What happened: Ma recently gave a speech he didn't need to give, at least not one he needed to give yet. He compared Chinese banks to "pawn shops," in terms of collateral required for business borrowers, and denigrated the character and convictions of financial regulators.

The regulators this week fought back, because that's what you do when someone spits in your face. They issued draft rules for online microlending and stricter capital requirements, effectively forcing Ant back to the IPO drawing board.

  • Even more crackdowns could be on the way, with Bloomberg reporting that China's top banking regulator "plans to discourage lenders from using Ant’s platforms."
  • Ma is not formally affiliated with Ant Group, but he's the controlling shareholder and former executive chairman of Alibaba Group, which spun out Ant and retains a one-third stake.

What happens next: A source close to Ant tells me that the company still wants to go public, preferably before the Chinese New Year in early February, but admits that the company is reeling from its reversal of fortune.

  • Ant may be forced to sell its microlending business. It may get treated as a depository institution, even though it argues it's just the software-enabled middleman. It may need to answer tough questions about its leverage ratio, particularly without that incoming $35 billion of new equity.

Axios' Felix Salmon writes that Ant "is one of the most systemically important financial institutions in the world, and at the moment it's barely regulated."

  • "All banks are tech companies, but tech can break. It's okay if a single computer crashes; it's not okay if a country's entire financial system goes down. If a technology company is also a systemically important financial institution, then it needs to be regulated just as assiduously as any other financial-services giant," he adds.

Market forces: This episode creates unexpected challenges for Shanghai's new STAR Market, which had positioned Ant as its Pied Piper for other Chinese tech unicorns.

  • It's possible that companies like Didi Chuxing will give STAR a mulligan, believing the Ant situation to be specific to fintech, but it also may take a fresh look at New York.

The bottom line: Ma's misstep could ultimately be rewarded if Ant and Chinese regulators come to a meeting of the minds, and restructure the company in a way that ensures post-IPO compliance for decades to come. But, at the moment, it appears that he fumbled at the goal line.

Go deeper

Felix Salmon, author of Capital
Jan 14, 2021 - Economy & Business

The complex new landscape of going public

Illustration: Aïda Amer/Axios

The question is no longer whether a company should go public; it's how.

Why it matters: The much-resented traditional IPO, run by Wall Street and largely for Wall Street, now has competition. A lot of it.

Acting Capitol Police chief: Phone logs show Jan. 6 National Guard approval was delayed

Pittman at a congressional tribute for fallen officer Brian Sicknick. Photo: Erin Schaff-Pool/Getty Images

Acting U.S. Capitol Police chief Yogananda Pittman testified on Thursday that cellphone records show former USCP chief Steven Sund requested National Guard support from the House sergeant-at-arms as early as 12:58pm on Jan. 6, but he did not receive approval until over an hour later.

Why it matters: Sund and former House sergeant-at-arms Paul Irving clashed at a Senate hearing on Tuesday over a dispute in the timeline for when Capitol Police requested the National Guard during the Capitol insurrection.

Manhattan prosecutors reportedly obtain millions of pages of Trump's tax records

Photo: Al Drago/Bloomberg via Getty Images

The Manhattan district attorney is now in possession of millions of pages of former President Trump's tax and financial records, CNN first reported, following a Supreme Court ruling that allowed prosecutors to enforce a subpoena after a lengthy legal battle.

Why it matters: Trump fought for years to keep his tax returns out of the public eye and away from prosecutors in New York, who are examining his business in a criminal investigation that was first sparked by hush-money payments made by Trump's former fixer Michael Cohen during the 2016 election.