Ant Group, an affiliate of Alibaba Group, announced their plan for dual IPO in Hong Kong and Shanghai recently. Learn why is this IPO so important for Ant and China.

An overview of Ant Group

Ant Group may be an unfamiliar name for some outside China some but is the brand owner of Alipay, one of China’s most popular digital payment apps. Ant Group is an affiliate of Alibaba Group Holding Ltd, one of the biggest e-commerce companies in the world. Ant Group was previously known as Ant Financial and originally spun out of Alibaba in order to get a digital payment license in China.

Ant Group recently announced their plan to do a dual initial public offering (IPO) by listing their shares in Hong Kong Stock Exchange and Shanghai Stock Exchange’s STAR which is the Chinese equivalent of US’s Nasdaq tech-heavy exchange.

An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors. It also allows public investors to participate in the offering – Investopedia

Alipay, with over 900 million customers in China, is an e-wallet system which allows users to scan QR codes to perform payment transactions in any merchants’ stores whether physical or online. The company has also ventured strongly into financial products including loans, insurance, and wealth management which make up above 50% of their overall revenue in their last fiscal year ending March 31.

Why a China Ant Group IPO

This move of Ant Group to list closer to home is coincidentally during the tensions crisis between the United States (US) and China, with threats of sanctions for Chinese officials and delisting of Chinese firms from US stock exchanges.

In January 2018,US blocked Ant’s attempt to buy US money transfer company MoneyGram in a $1.2 billion deal, citing national security concerns.

“Becoming a public company will enhance transparency to our stakeholders, including customers, business partners, employees, shareholders and regulators. Through our commitment to serving the under-served, we make it possible for the whole of society to share our growth,” ~Eric Jing, Ant CEO

They however did not reveal how much will be raise from the dual IPOs or when it would go public.

According to a report by Reuters earlier this month, citing two unnamed sources close to the company, the valuation of the deal is more than $200 billion.

“The dual listing is essential to help Ant complete its plan in digitizing the China’s digital industry and develop global market with partners and provide better investment chances in innovation and technology.” ~Ant Group

The whole process until listing is estimated to take 6 to 9 months to complete with Ant Group declining to set a firm date on what could be the biggest IPO of 2020. Listing on Hong Kong also shows that China has options for companies despite the ongoing geopolitical and domestic tensions. China could be seen as a winner if the company makes it onto the STAR board.

Overall

Ant Group’s announcement to do a dual IPO is viewed as a move by a Chinese company to escape from US during the heightened tensions between America and China. This move may disappoint some American investors interesting in buying shares from one of the world’s biggest startups with a unicorn status. But overall for existing shareholders of Alibaba, the Ant Group listing is viewed positively with Alibaba having a 33% stake in Ant Group. An additional injection of equity into Ant Group will help fund further expansion and provide funds for its continued battle with Tencent Holdings.

 

You May Also Like

 

How excited (or fearful) are you with the new Ant Group IPO?