The mother of all Initial Public Offerings (IPOs) that was supposed to change the landscape of the global fintech industry came to a crashing halt earlier this month. Just 48 hours before the debut, due to last-minute regulatory changes, Jack Ma’s Ant Financial’s IPO had to be pulled off from the primary market.

This sudden suspension of the $34.4-billion IPO has given rise to a fierce debate on corporate governance in China. While the role of governance and regulatory mechanisms are being talked about, the human aspect of things, from an employee perspective seems to be largely missing.

Two sides of the debate

The side advocating for greater control and oversight appreciates the move on the part of regulatory institutions in China. The Chinese central bank and the regulatory bodies administering the stock exchange, insurance market, and foreign exchange have tried to ensure that no company grows too big in size and complexity. This would ensure that the regulation of such companies does not get too hard to carry out.

Hence, this decision of the market regulators to safeguard the market has been lauded by many market experts.

However, leading global business media houses have shed light on another side of this story. They have noted that this is just Beijing reining in Jack Ma as he had made some adversarial comments in October last year on the way Chinese banks carried out their business.

He had criticised their “pawnshop” mentality of requiring collateral for extending credit. Jack Ma also stressed the importance and usage of big data for a smoother lending process. But the above views were not well received by the Chinese bankers. The halt on the IPO was just Beijing’s way conveying to Ma that who holds the whip.

Impact on employee morale

This last-minute intervention has also left the investors and employees confused. A successful IPO talks a thousand words, but less is realised about the effect of a failed/blocked IPO on the employees of the firm.

For employees, a successful IPO is a much-anticipated reward not necessarily for financial gains, through the jump in the value of their ESOPs, but also for intangible benefits. Conversely, a failed IPO could have severe negative consequences for them.

This dip in morale affects productivity, job satisfaction, and can even result in employee attrition. Since the failure is attributable to the top management, employees feel cheated and start looking for alternative job opportunities, as evident in case of recent failures such as The We Company, Ferretti, and Property Guru.

Identity crisis post-IPO failure

Employees generally hold an organisational identity, which serves as an anchor for them in a variety of social and economic arenas of life. It binds an employee to an organisation, and employees find meaning for their work in it. Humans feed on ‘hopes’ and ‘aspirations’, and an announcement of an IPO brings rich fodder for them.

An IPO becomes a significant event in the life of every employee of the firm and a subsequent failure of it could make a huge dent on their identity and the meaning they attach to their jobs. Employees might perceive such situations as a signal to a bigger crisis within the firm, causing job insecurities and thus a depletion in their intellectual resources.

Any incident that results in higher employee turnover can hamper the innovation capabilities and overall performance of the organisation.

A clear communication to employees from the top management addressing their concerns is essential. Neither the regulators nor the management has clarified the reasons for this sudden termination of the IPO. This does not bode well for the employees who may assume the worst and jump ship leaving the company in the doldrums.

However, what remains to be seen is how Ant Financial responds to these new regulatory changes. How Ant Financial adjusts its operations and comes back to the market for its IPO will be keenly watched. However, a lot of that would be dependent upon the morale and attitude of its employees.

Saravanan is a Professor at IIM Trichy, and Lanke and Banerjee are doctoral candidates