Ant Plans $17.5 Billion Hong Kong IPO, No Cornerstones

Bloomberg | Lulu Yilun Chen | Sep 23, 2020

Ant IPO review - Ant Plans $17.5 Billion Hong Kong IPO, No Cornerstones

Jack Ma’s Ant Group Co. is seeking to raise $17.5 billion in its Hong Kong share sale and won’t seek to lock in cornerstone investors, confident there will be plenty of demand for one of the largest equity deals in the financial hub, according to people familiar with the matter.

The fintech giant has assessed investor interest, betting it can pull off the Hong Kong portion of the initial public offering without cornerstone investors that are often needed for large deals, according to the people. Ant is leaning toward inviting these big investors for the Shanghai sale to mitigate price fluctuations, the people said, asking not to be identified because the matter is private.

The Hangzhou-based firm is planning to issue new stock equal to about 11% to 15% of the shares outstanding and split the float evenly between Hong Kong and Shanghai, the people added. Ant is mulling what could be the world’s largest IPO, seeking to raise about $35 billion in the dual listing at a valuation of about $250 billion, people familiar have said.

See:  Exclusive: Ant Financial shifts focus from finance to tech services: sources

Plans are still under discussion and could change. Ant declined to comment in an emailed statement.

Cornerstone investors, more common in Hong Kong than in other markets, are usually large institutions that agree to hold the shares for about six months in exchange for a sizable allocation. While the investments boost confidence in the listing company, they’ve been criticized for draining liquidity from the market. Companies that chose to break with the tradition have been burned in the past, including Budweiser Brewing Co. APAC Ltd.

Ant currently has about 27 billion shares outstanding. It’s also planning to issue about 6% of its shares, on top of the new float, to help redeem stock for early C-round international investors that couldn’t invest directly in the onshore entity, according to its prospectus.

For Ant’s Shanghai sale, five companies have agreed to subscribe to the listing via new mutual funds, Ant said in a filing Tuesday. The funds will seek to raise $1.8 billion each, capping Ant’s shares to 10% of the underlying fund assets.

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MarketWatch | Emily Bary | Sep 24, 2020

Ant Group IPO: Five things to know about the Alibaba affiliate aiming for the largest offering in history

Chinese financial-technology juggernaut, known for its Alipay ‘ ubiquitous super app,’ handles payments, insurance, investments and more

Ant Group could be headed for the largest initial public offering in history, as the Chinese financial-technology juggernaut chases a valuation that would rival the biggest payments companies in the world.

See:  Exclusive: China’s Ant aims for $200 billion price tag in private share sales – sources

The Alibaba Group Holding Ltd.–affiliated company controlled by Jack Ma has filed paperwork to list its shares concurrently on the Hong Kong and Shanghai exchanges. Ant, which runs China’s immensely popular Alipay mobile wallet, is reportedly looking to rake in at least $35 billion through an offering that could value the company at $250 billion, according to Bloomberg.

That would make Ant’s offering larger than that of Saudi Aramco, which brought in more than $25 billion in the biggest IPO to date. A valuation of $250 billion would mean Ant is worth more than Bank of America Corp. BAC ($207 billion) and PayPal Holdings Inc. ($213 billion) but less than JPMorgan Chase & Co. ($287 billion), Mastercard Inc. ($336 billion) and Visa Inc. ($427 billion).

The company is best known for its mobile-payments offering, but it aims to be a one-stop financial hub that also provides access to wealth management, investing and insurance services. Analysts view the payments portion of the business as a gateway that brings users in to Ant’s more complex offerings.

Here are five things to know about Ant as it prepares for a public debut.

A sprawling financial empire

Unlike Western mobile wallets, Ant’s platform touches on nearly all aspects of one’s financial life. Ant goes beyond what PayPal and Apple Inc.’s.   Apple Pay do, offering services for everything from payments to credit to insurance to investments within Alipay, which the company calls a “ubiquitous super app.” Ant counts more than a billion annual active users for the Alipay app and 711 million monthly active users.

See:  Global News Radio Interview with Michelle Beyo: Alipay – Moving Money Between Countries

The Alipay app is “synonymous with digital payments in China,” Ant said in its filing. Bernstein analyst Kevin Kwek sees the payments component as a “hook product” for the company that may have limited profit potential but helps the company bring in new users who can then try out more lucrative services.

Tightly linked

Alibaba previously had a profit-sharing arrangement with Ant in which Alibaba received 37.5% of the company’s pretax profits, but Alibaba announced in early 2018 that it would be switching to an equity structure. Now, Alibaba has a 33% stake in Ant through its subsidiaries, a move that analysts thought would help the Chinese e-commerce giant benefit from a potential Ant IPO down the line.

Money machine

Ant generated RMB 120.6 billion ($17.7 billion) in revenue over the course of 2019, up from RMB 85.7 billion a year earlier. The company’s latest annual total consisted of RMB 51.9 billion in digital-payments revenue and RMB 41.9 billion in credit-technology revenue. Ant added RMB 8.9 billion in revenue from insurance technology and RMB 17 billion from investment technology.

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