Ant Group Postpones its IPO
A Meeting With Regulators and Ant Executives
Ant Group’s IPO in Shanghai and Hong Kong has been postponed. The Chinese fintech giant was expecting to raise about $34.5 billion through its listing, which would have set a record for the largest IPO in history.
However, Chinese regulators called a meeting with Ant Group executives on Monday, including Jack Ma—Ant’s controlling shareholder and a co-founder of ecommerce superpower Alibaba (BABA). Following this meeting, Shanghai’s STAR exchange made a surprise announcement that Ant’s plans for an IPO might no longer meet listing requirements. After the STAR market’s decision, Ant announced it would also hold off on its Hong Kong listing until further notice. Neither Ant nor regulators have discussed what transpired in the Monday meeting.
Ant’s Recent Strategy
Ant is responsible for huge changes in the way Chinese people deal with money in their daily lives. The company’s app has 730 million users. It offers a digital payment system as well as loans, insurance, investment opportunities, and more.
For some time, Ant has faced scrutiny from regulators in China. In response to regulatory concerns, Ant has changed its business model. It now focuses on connecting banks to consumers rather than using its own money to loan out as it once did.
Ant’s recent strategies seem to have been successful. The company’s market valuation after the dual listing was expected to be over $310 billion, making it more valuable than many international banks. However, Ant’s future is heavily dependent on decisions from Chinese regulators.
New Regulations Could Impact Ant
On Monday, the China Banking and Insurance Regulatory Commission, one of the regulators involved in the Ant meetings, proposed a new set of regulations for online lenders that could require Ant to make changes to its business model. These changes could include setting aside more money for the loans it makes and putting more credit risk on its balance sheets.
The future of Ant’s IPO as well as the reason why it has been called off for the moment remain uncertain. Some are suggesting that the Chinese government wants to remind private businesses of its power. However, Beijing has been striving to grow its capital markets recently, and the decision to stand in the way of an IPO could discourage large companies from listing in the country in the future. Ant investors will be carefully watching for clues about if and when the listing will happen, and how new regulations may impact Ant’s future.
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Big Tech Turns to Hollywood for Technology and Talent
Creating AR and VR Systems
Tech companies like Google (GOOGL), Facebook (FB), and Apple (AAPL) are working to create virtual reality and augmented reality platforms, glasses, and headsets. To build these systems, tech companies are turning to people and technology behind Hollywood movies like Avatar and Rogue One: A Star Wars Story.
Leaders in the VR and AR world believe that mass adoption of these systems depends on making the experience of using this technology as lifelike as possible. This means building computer-generated people and places that look real. Achieving this kind of believability is important for AR, where computer-made images are superimposed onto the real world, as well as VR, where an almost entirely immersive user experience is created.
The “Cool Tax” for Engineers and Artists in Hollywood
Though computer-generated visual effects have become ubiquitous in TV shows and films, studios are paying less for this technology than they once did. This means that salaries for visual effects specialists are dropping.
Working in Hollywood can also come with unpredictable hours, low job security, and limited benefits. Some call this the “cool tax” employees pay for working in the entertainment industry. In addition to challenges that have been a part of the entertainment industry for years, the pandemic has placed unique strains on the movie and TV industry with theater closures, production delays, and more. This has added further career uncertainty for people working in the industry.
While salaries for visual effects artists and engineers are dropping in the world of film and TV, the opposite is true in the tech industry. According to research from Accenture PLC, these companies will spend an estimated $121 billion on immersive technologies by 2023—up from $21 billion in 2020.
AR and VR Products from the Tech World
An important tool for using AR and VR to create images of faces is called a Light Stage—a spherical device which contains over 40 cameras. This device was used for effects in movies like The Curious Case of Benjamin Button and Gemini Man. Google has built its own Light Stage, which captures not only the human face, but the entire human body. It is working with former Hollywood engineers and artists to build digital images of humans that look real.
Apple is also working on similar projects. One of the company’s latest achievements created through technology and talent drawn from Hollywood is its Animojis, which let users combine their own facial expressions with animated characters. The possibilities of VR and AR are vast, and tech companies are racing to recruit the best people and adopt the best technology from the entertainment industry.
Natural Gas Companies Outperform Oil Producers
Oil Prices Drop While Gas Prices Rise
US shale drillers are facing different market conditions. Companies that pump mainly oil are still struggling due to the pandemic-related downturn, while natural gas producers are beginning to see business recover.
Heading into the winter, crude prices are dropping as investors weigh concerns about a second wave of COVID-19 cases, which could cause more lockdowns and travel restrictions. On the other hand, as the weather turns colder, the price of natural gas is climbing. Natural gas is used for heat and electricity, and demand for the resource is far less sensitive to COVID-19 restrictions.
COVID-19 Lockdowns Impact Demand for Oil and Gas Differently
Last month, as some European countries implemented new lockdown measures, US benchmark oil prices dropped 11% to their lowest level since June. Since then, prices have recovered slightly, but are still far from pre-pandemic prices. In contrast, US benchmark natural gas prices surged 33% last month, reaching their highest level in almost two years. They then settled somewhat, but natural gas is still outperforming oil by a long shot.
For years, companies focused on natural gas have lagged behind oil companies. However, that has not been the case this year. The six largest public Appalachian gas companies in the country, including EQT Corp. (EQT) and Range Resources Corp. (RRC) have seen their market value rise about 18% since the beginning of 2020. On the other hand, the market capitalization of the 25 largest oil companies in the country has dropped by 53%.
Though oil producers and gas producers are facing different market conditions at the moment, analysts are pointing to one challenge facing them both—looming debt. Oil and gas companies ran up debt during the fracking boom and much of that debt will mature in the near future.
As of September, about $40 billion in oil- and gas-producer debt will be due by 2022 and $126 billion will mature through 2025. For companies with strained balance sheets, uncertain market conditions combined with debt coming due could cause challenges.