Identifies Fiduciary Duty to Reveal Financial, Human Rights, National Security Exposure
September 15, 2020
WASHINGTON, D.C.— The Committee on the Present Danger: China (CPDC) today wrote the leadership teams of the Hong Kong stock exchange and four of the most prominent investment banks on Wall Street regarding an upcoming, and increasingly controversial, initial public offering by Ant Technology Group. This Chinese Communist Party-tied corporation expects to raise $30-40 billion—the biggest IPO ever—when Ant launches it next month in Hong Kong and Shanghai. As things stand now, a sizeable portion of the funds thus raised will come from U.S. investors.
A recently released analysis by an independent research firm, RWR Advisory Group, entitled, “Risk Profile: The Ant Technology Group,” has raised concerns that this IPO is encumbered with inadequately disclosed or simply undisclosed material risks that should affect both the timing and the appeal of this offering as an investment option. Specifically, as noted in the letters sent to Goldman Sachs, J.P. Morgan Chase, Morgan Stanley and Citigroup, the Risk Profile identifies the following seven problematic risks with Ant Technology Group:
- The national security considerations that prompted the U.S. government to oppose Ant’s acquisition of MoneyGram;
- The role played by Ant and its partial owner, Alibaba, in the severe human rights abuses of Muslim Uighurs by the Chinese Communist Party (CCP);
- The use made of Ant’s technologies by the CCP and its People’s Liberation Army to oppress the people of China and Captive Nations and to threaten ours;
- Ant’s seminal role in the development and operation of the CCP’s totalitarian “Social Credit System”;
- The illicit collection of private and proprietary data via Ant technology and software;
- The ostensibly private Ant Group’s ties with, and subordination to the dictates of, the Chinese government; and
- The prospect that Ant share value will suffer due to escalating geopolitical tensions – a growing problem about which the U.S. government has repeatedly warned.
The bottom line is that Ant is a sophisticated, multi-layered conglomerate that provides a variety of products and services, many of which lend themselves to military and surveillance state, as well as commercial, applications. Ant Group and its part-owner Alibaba have, as a result, been tied to activities that should be concerning to every American investor—not only in terms of potential future declines in share-value, but with respect to U.S. human rights values and national security.
Investing in such a company is all the more fraught, however, thanks to the inadequate disclosure of Ant’s actual material risks and the seeming indifference to that fact shown by American investment banks that will be seeking to promote this IPO for huge fees.
The CPDC notes that the Trump Administration has laudably removed Hong Kong’s special status in the face of the CCP’s ongoing abuse of the territory’s people and its promise for them to enjoy decades more of political autonomy. Were the Ant IPO to be successful, however, it would effectively demonstrate that the CCP is free to impose totalitarian measures on the people of Hong Kong with little, if any, financial or geopolitical consequences.
It is deeply troubling that any U.S. investment banks, let alone four of the most prominent ones, would encourage Americans to put their money into such a company, both because of where it will end up—benefitting the Chinese Communist Party—and because of the inherent perils associated with investing in a foreign company with the inadequately or undisclosed risk characteristics of Ant Group.
Finally, in a cover letter relaying the CPDC’s letters to Honk Kong Exchange and Clearance, Ltd. and its letters to the four U.S.-headquartered investment banks, CPDC Chairman Brian Kennedy wrote to President Trump (with copies to his senior subordinates). After discussing the need for full disclosure of the Ant Group’s material risks, Mr. Kennedy made the following recommendations:
We believe that the IPO should, at a minimum, be delayed to ensure that such disclosures are faithfully done and properly evaluated as, regrettably, a sizeable portion of the IPO proceeds will almost surely end up in the investment portfolios of millions of retail American investors.
The CPDC believes, moreover, that—given, for example, Ant Group’s role in oppressing the Chinese people and those of the PRC’s Captive Nations, its support for the People’s Liberation Army and its theft of private and proprietary information—the company should properly be placed on the Commerce Department’s Entity List as soon as possible. Such a step should, in turn, be designed to substantially dampen, if not foreclose, U.S. investments in Ant.
For its part, the CCP hopes to translate a huge IPO victory for Ant, largely bankrolled by American investors, into a validation of its bid to continue to have access to hundreds of billions in Western financing, despite its vicious crackdown on Hong Kong. Beijing is also calculating that this success would eviscerate [Mr. Trump’s] own, commendable efforts and the enforcement of the bipartisan Hong Kong Autonomy Act aimed at punishing the PRC for its repression of that territory.
We should respond to such a gambit by “de-pegging” the U.S. and Hong Kong dollars. This measure would powerfully counteract the CCP’s attempted end-run into the U.S. capital markets and undercut this highly symbolic IPO.
We urge you to use your “bully pulpit” and formal authorities to encourage Americans to invest patriotically in strengthening our country and to deny the Chinese Communist Party the resources that enable it to oppress its own people and threaten ours with help from companies like Ant Technology Group. (Emphasis added throughout.)
To interview representatives of the Committee on the Present Danger: China, contact
Media@HamiltonStrategies.com, Patrick Benner, 610.584.1096, ext. 104, or Deborah Hamilton, ext. 102.