Five mutual funds set up to offer exclusive access to Ant Group’s now-suspended $37bn listing are taking steps to offer angry retail investors a way to get their money back, but it may not be enough to quell the brewing outrage.
China’s biggest fintech group, controlled by billionaire Jack Ma, was accused of a conflict of interest when it offered retail investors access to its initial public offering — set to be the world’s largest — via an arrangement with the mutual funds distributed solely through its own Alipay mobile phone app.
Retail investors in the funds were subject to an 18-month lock-up period. Since Beijing’s abrupt suspension of the deal last week, they have become increasingly agitated after the funds declined to immediately return their cash, with many taking to social media to voice their displeasure and demand a refund.
“Everyone bought in because of Ant, now there’s no Ant shares . . . give investors the right to choose,” wrote one commenter underneath a notice posted by one of the funds on the Alipay app.
The five funds — run by China Asset Management, China Universal Asset Management, Zhong Ou Fund Management, Penghua Fund Management and E Fund Management — raised a total of Rmb60bn ($9bn) from retail investors. Up to 10 per cent of the cash was to be allocated to the Ant Group listing, with the rest invested in other tech stocks.
Following the IPO halt, the funds said they still planned to proceed with the other tech investments.
But in response to the online outcry, the five funds said they would apply to change their structure to become listed open-ended funds traded onshore in China. This would technically allow an investor to exit by setting up a trading account and then selling their shares in the funds once listed.
Yang Siqi, an analyst at HwaBao Securities, said this plan did not offer investors a straightforward exit route because they would still have to open a trading account if they did not have one already. The investors also faced a probable drop in the valuation of their shares.
“Opening such an account . . . can be extra trouble to investors. And since there is a negative mood towards those funds now, it’s highly possible there will be a price drop when they get listed,” Ms Yang said. “The whole incident may have blown investor confidence in those funds.”
Yang Han, an analyst at Shanghai Securities Fund Evaluation Research Center, agreed that investors potentially stood to lose money as they would “face a fluctuation in the secondary market”.
Three individual investors in the funds who spoke to the Financial Times voiced displeasure about the hassle involved in the funds’ solution.
Ms Meng, a 32-year-old investor in Shanghai who declined to give her first name, invested Rmb4000 via two different funds. “The steps [to cash out] are a bit cumbersome since I bought the funds directly in Alipay and I don’t have a stock market account,” she said.
The mutual funds were advertised to retail investors on the basis of their investment in the Ant Group IPO, which was suspended just two days before shares were set to start trading after Chinese regulators announced new regulations that would treat fintechs more like the country’s tightly controlled banks.
Additional reporting by Nian Liu in Beijing