With Ant IPO in Limbo, Funds Let Investors Cash Out

(WSJ) Funds that touted access to Ant Group Co.’s blockbuster share sale will let investors cash out early, following a social-media outcry after the financial-technology giant’s listing was abruptly halted by Chinese regulators.

In the run-up to the now-suspended initial public offering, five mutual funds in China raised 60 billion yuan, or about $9.07 billion, from more than 10 million small investors. The funds, managed by some of the country’s largest investment firms, were sold via Alipay, Ant’s popular mobile payments and lifestyle platform. 

The funds used a marketing blitz to highlight that they could invest up to 10% of their assets in Ant, though this wasn’t written in their contracts with investors, or in fund-sales documents. Many investors were expecting Ant’s shares would surge after the IPO, which at more than $34 billion was set to be the world’s largest ever. Money invested in the funds was to be locked up for 18 months.

However, after Ant’s IPO was suspended last week, some investors argued they were cheated, as the main attraction for them was owning shares in Ant. “You should give back our money given Ant cannot go public now. This fund without Ant is no longer what we want,” one investor wrote online.

Last Thursday, the China Securities Regulatory Commission said it had seen the complaints by fund investors. It urged fund houses to give priority to investors’ interests and fully consider their reasonable demands.

The funds already appear to have made some other investments. Four of the five funds are above water, with slightly higher net asset values than when they launched, their latest disclosures show. Fund holdings aren’t disclosed.

Investors in the five vehicles can apply to redeem their investment between Nov. 23 and Dec. 22 without incurring fees, the fund houses and a subsidiary of Ant said in a joint statement Tuesday.

Repayments will be based on the floating net asset value per fund unit, a way of pricing mutual-fund investments. The statement didn’t say whether investors who kept their holdings would still be subject to an 18-month lockup.

The five funds will also apply to become listed funds trading onshore in China. That would allow investors to exit at a later date by selling units to other investors on the open market, offering an alternative exit to requiring the fund managers to buy the units back.

Some investors posting on investment forums welcomed the statement. One said the arrangement took investors’ interests into account, adding, “Let’s exit.”

Not all investors plan to sell out. “I bought the fund because I am bullish on the sector,” wrote someone on a chat room operated by East Money, an online broker and investing website.

The fund managers include two of China’s largest by assets under management, E Fund Management Co. and China Asset Management Co., or ChinaAMC. The other three funds are run by China Universal Asset Management, Penghua Fund Management Co. and Zhong Ou Asset Management Co.

The mutual funds were hugely popular partly because individual investors can only place direct orders for shares in IPOs on Shanghai’s STAR Market if they meet minimum requirements for brokerage assets and trading experience.

Source: Wall Street Journal by Xie Yu

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