Ant Group’s IPO Scandal Led to Alibaba’s 29% Stock Drop and Regulatory Scrutiny: Can They Come Back?

Court: S.D. New York

Case: 1:20-cv-09568

A quick review of the story of Alibaba and the Ant Group’s failed IPO, which triggered a 29% stock drop in 2020, and how this can affect their current results.

Back then, Alibaba was preparing for a record-breaking $35 billion IPO for its affiliate, Ant Group. It should be a game-changer in financial tech and Alibaba’s value. But just days before the launch, regulators revealed that Ant had sidestepped key banking rules to expand its lending services.

The IPO was suspended, and BABA’s stock dropped 13% in a single day. Soon after, the Chinese government launched an antitrust investigation into Alibaba’s monopolistic practices.

The situation got even worse when it came to light that Ant’s business model relied on risky lending, and hidden investors tied to Ant’s IPO raised political concerns.

The combination of regulatory intervention and the suspension of the IPO caused Alibaba’s stock to drop 29% (from $310 in November 2020 to $222 by the end of December).

After all these situations, investors filed a lawsuit against the company, which Alibaba has already agreed to settle with a $433.5M agreement to resolve these claims. If you invested back then, you can check if you’re eligible to file for compensation.

Luckily, since then, Alibaba has completed three years of regulatory "rectification" and paid a record $2.8 billion antitrust fine.

But while the company is trying to turn the page, its stock is still far from its 2020 highs, trading at $108.