Scott Murdoch and Julie Zhu

HONG KONG – JD.NASDAQ: Technology is being forced to defer a potential Hong Kong IPO of up to $2Billion because of a lack of approval from the Chinese regulatory authorities. According to four sources with knowledge, this was due to the fact that there hasn’t been any domestic regulatory approval.

JD.Com submitted a late-January application to China Securities Regulatory Commission, (CSRC), for an offshore listing.

According to three sources, the company was planning on filing its first filings at the Hong Kong Stock Exchange in March. This would be followed by the launch later in the year of the initial public offerings (IPO). According to sources, it appointed banks for the listing.

The CSRC has yet to approve the company’s domestic incorporation to allow it to list off-shore, even in Hong Kong controlled by China, the added.

This development highlights the uncertainty that Chinese technology companies continue to face when trying to offshore list. There is also growing scrutiny over their business structures, data security and other aspects.

This also presents a challenge for JD.Com’s new CEO LeiXu, even though the company appears to be relatively unaffected by China’s recent regulatory crackdowns that have weighed down on its business growth and offshore fundraising as well as share prices with rivals in the last year.

JD.Com, JD Tech didn’t respond to email requests for comment. A faxed request to comment was not answered by the CSRC.

According to one source, the main concern regarding JD Tech’s planned IPO is the company’s consumer financing business. The other three sources also declined to identify themselves due to confidentiality restrictions.

The details of JD Tech’s plans to address the concerns expressed by regulators and the timeframe for listing were not clear.

Chinese regulators increased scrutiny of crowdfunding by fintech firms, as these usually include consumer finance companies. Alibaba (NYSE) Affiliate Ant Group for 2020

Beijing’s recent discomfort with the use of micro-lenders by banks or third-party Fintech platforms to underwrite consumer loans has led to fears about rising defaults, deteriorating assets quality and worsening economic conditions.

HONG KONG IPO SUFFICIENT SLOWDOWN

JD.Com’s fintech company has not suffered a setback in this regard. JD Tech’s predecessor JD Digits applied for a 20 Billion Yuan ($2.97B) IPO in Shanghai’s STAR Market on September 2020, but it was withdrawn in March 2017.

JD.Com also sold its AI and cloud businesses to JD Digits in the same month. This was a market move to reduce JD.Com’s initial focus on finance.

JD Digits prospectus for 2020 states that its two consumer finance platforms, Baitiao (and Jintiao) had combined 70 million active users annually in the first half.

Three people familiar with the matter said that JD Tech was forced to recast its financial records due to delays in securing approval from the Hong Kong regulator for the IPO.

JD Tech’s Hong Kong listing delay worsens this city’s poor IPO performance. According to Refinitiv data, $1.9 billion has been raised so far, compared to $20.3 million last year.

($1 = 6.7228 renminbi)