Ant Group to Issue History's Largest IPO

The 21st person on Forbes' "World's Most Powerful People", Jack Ma, once again projected to break the largest Initial Public Offering (IPO) record. China's mobile payments firm of Alibaba Group Holding Ltd (BABA), Ant Group, has filed for a dual-listing IPO in Hong Kong and Shanghai's STAR Market. Based on the report from parties associated with the late matter, the company seeks to raise a massive $30 billion, in perhaps the world's largest IPO. Previously, Jack Ma's Alibaba, which has a 33% stake in Ant Group, raised $25 billion when it held its IPO on Wall Street in 2014 and has only been surpassed by Saudi Aramco's IPO, in which they raised $29.4 billion in the Riyadh Stock Exchange last year. Following the news, Ant Group is said to have exceptional performance, shown by their reported revenue of a massive $10.5 billion for the six months up until June 2020, increasing 38% from the previous year. Analysts see Ant Group's interesting decision to land its IPO in Hong Kong because it became the world's top listing venue in 2019; also pushed by Alibaba's $12.9 billion secondary listing there. "Hong Kong provides access to international institutional investors and convertible currency, whereas Shanghai may allow broad participation by domestic investors," said Drew Bernstein, co-chairman of advisory Marcum Bernstein & Pinchuk. Other than that, tech firms account for 25.1% of Hong Kong's benchmark Hang Seng Index and Hong Kong Stock Exchange (HKEX), making Hong Kong the perfect listing venue for big tech companies like Ant Group.

With a valuation of $225 billion, they solidified their position as the world’s fourth-largest financial company. The firm is a titan within Chinese payment market through the seemingly omnipresent Alipay app. It also runs the giant Yu’ebao money market fund and the Huabei and Jiebei consumer lending units. For those that don’t have ready cash to spend via Alipay, the services provided by Huabei (Just Spend) and Jiebei (Just Lend) are great alternatives as they’re simply small unsecured loans. The former focuses on quick consumer loans for short-term, instantaneous purchases, while the latter finances hefty priced goods ranging from travel to education. These platforms made loans to about 500 million people in the 12 months through June, charging annualized rates on its smaller loans of about 15%. Furthermore, the company in 2019 entered the insurance market, creating a health care product called Xianghubao that allows people to pay a small monthly fee that is pooled to help cover treatment costs for members stricken by diseases such as cancer, Alzheimer’s and even Ebola.

However, the IPO submission is threatened by the presence of US-China trade tautness, as it showed by the geopolitics tensions in the dual IPO submissions on Tuesday night (8/25), citing the possibility of U.S. export controls and trade sanctions as the main expansion risks. The Ant Group itself decided not to be listed in the U.S. to avoid Trump's administrative oversight to Chinese companies. Mark Tanner, managing director of Shanghai-based consultant China Skinny stated that "The greater concern is that if the U.S. passes a sanction of some sort, the other markets in India, Southeast Asia where Ant is looking for growth could be affected." Such a statement is increasingly concerning as Alibaba, which Trump threatened, is also the largest shareholder of Ant. Previously, when the initial IPO was submitted, the Alipay transaction, whose technology was driven by Ant, reaped huge profits, providing potential benefits for private equity firms in the U.S., such as Silver Lake Management. Still, in the end, Alibaba and Ant stopped because of the trade tensions. Hence, Ant only wants to focus its collaboration with 9 Asian-based companies, two of which are PayTM in India and GCash in the Philippines. All in all, the trade tensions might jeopardize a historical event in capital market history, but the massive IPO of Ant Group will be remembered for years to come.

Sources:

Bloomberg

CNN

Reuters

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