China’s suspension of Ant Group’s $37 billion listing just days ahead of its stock market debut has thrown the company and its investors into a tailspin and it faces a scramble to try and satisfy financial regulators, analysts say.

The company has been trying to present itself as a technology company, rather than a financial giant, but Chinese regulators have become increasingly uncomfortable with parts of its sprawling empire, namely its most lucrative credit business which contributed close to 40% of the group’s revenue in the first half of the year.

WHAT ARE THE NEW REGULATORY RULES ANT FACES?

Chinese regulators moved on Monday to recommend the tightening of regulations for online micro-lending companies to help contain potential financial risks and rein in rising debt levels, foreshadowing Ant’s listing suspension on Tuesday.

Analysts said Ant will need to abide by these rules and disclose their financial impact in order to press ahead with its plans to list in Shanghai and Hong Kong.

The draft rules published by China’s central bank and banking regulator seek to raise the bar for micro-lenders to be able to provide online loans directly to consumers or jointly with banks, while limiting the amount they can lend.

The draft, open for public feedback until Dec. 2, requires small online lenders to provide at least 30% of any loan they fund jointly with banks, which is widely considered to be a key rule that will hurt the profitability of Ant’s current business model.

Ant’s two co-lending subsidiaries Huabei and Jiebei will no longer be allowed to sell wealth management products based on the new rules, analysts noted.

“If the rules will be implemented, the online micro-lending industry will be heavily adjusted and the internet companies that are aggressively expanding through the lending business will be severely impacted,” wrote Dong Ximiao, chief analyst at Zhongguancun Internet Finance Institute, in a report published on Wednesday.

WHAT ANT NEEDS TO DO

Zhang Yi, chief executive of consultancy iiMedia, said that regulators likely realised that Ant’s credit business was not unlike a commercial bank when details were made public in its prospectus.

To comply with regulatory demands, Ant’s best option might be split up its businesses into several IPOs, which include a credit unit IPO and a tech unit IPO (the payment unit), and get different multiples for different units of its businesses, Zhang said.

More specifically, Ant will need to apply for new licenses for its credit business to fully comply with regulators and be regulated as an entity under financial holding company rules which took effect on Nov. 1, analysts noted.

These requirements mean that Ant’s IPO will likely be unable to go ahead in the short-term, others said.

On Wednesday, Ant said it would refund the application monies relating to the Hong Kong public offering, together with brokerage commission and transaction fees, in two batches without interest.

POSTPONEMENT, NOT CANCELLATION?

Analysts also noted that since Ant as well as the Shanghai and Hong Kong stock exchanges described the listing as being “suspended”, it will still press forward once major issues have been resolved.

“Such regulatory and business model adjustments are all part of a process, they are not individual one-time-off events,” said Alex Sirakov, senior associate at advisory firm Kapronasia.

“Financial services and consumer protection are not a static space and a good game theory outcome will imply that all sides involved will have to make concessions.”

Li Chengdong, a Beijing-based tech analyst, said Ant’s valuation would likely be dented but what was in the company’s favour was that it was still a giant with state investment backing and had an influential founder in the form of Jack Ma.

“To stress systematic safety, this is the regulators’ stressing their stance,” he said. “Ant may end up having an IPO that was not as ideal as what it would have had this time, but it won’t be too bad.