Dividends and Beijing gives initial nod to revive Ant IPO plans

China is an interesting country, on one hand the government allows and encourages companies to do their own thing, but every once in a while the government decides the owner or the company is getting too big or too uppity or too something and then cracks down. The companies have to grin and bear it, while the situation sorts itself out. In the case of Alibaba (similar to Amazon in China), the government decided it was getting too out of control, its Chairman Jack Ma was speaking out and the government sent the China Securities Regulatory Commission (CSRC) on its tail.

In an article by Julie Zhu of Reuters, Alibaba owns an bank called Ant Financial and it was giving loans that state banks could not so they cried foul and the government cracked down on Alibaba. One of the elements was to stop an IPO of Ant Financial in November of 2020. The IPO at the time was to be valued at $315 billion and $37 billion in shares were to be sold. The new IPO will be at less money.

Since the crackdown, Mr. Ma has kept a low profile, Alibaba and Ant have waited for the Chinese government and its agencies to do their regulatory work. Also similar to countries around the world, the slowdown in economic growth has affected China, which means China wants growth in the economy and needs the help of Alibaba.

Linking to dividend paying stocks, all companies in the stock market need to consider the host government positions. Most of the time, the government and the company will be able to easily work together, but once in a while the government needs a poster child to say it is not beholden to companies. One or more companies will be in the crosshairs of the government for a time and then it will abate. Ideally, the company tries to do what it does best sell its goods and services at a profit and pay dividends and wait till the government find another issue of importance to the taxpayer.

There are more questions than answers, till the next time – to raising questions.


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