Ant Group is gearing up for an initial public offering (IPO) that could give it a valuation as big as Bank of America – with Alipay driving the price into the stratosphere. The e-commerce and FinTech giant has also noted geopolitical tensions in its filings for a dual IPO in Hong Kong and Shanghai as opposed to the US, citing possible US export controls and trade sanctions as key expansion risks.
Ant group files for IPO – Alipay drives the price up
Ant decided against listing in the US amid increased scrutiny by the Trump administration of Chinese companies, and warnings to US endowment funds to offload their stakes in US-listed Chinese businesses.
“The greater concern is that if the US passes a sanction of some sort, the other markets in India, Southeast Asia where Ant is looking for growth could be affected,” said Mark Tanner, managing director of Shanghai-based consultant China Skinny. He added that Ant and Alibaba have side stepped a lot of the risks that its Chinese competitors like Tencent and Bytedance are facing.
The simultaneous listing could mark one of the biggest debuts in years, topping Saudi Aramco’s record $29 billion IPO. The firm is targeting a valuation of about $225 billion, based on an IPO of about $30 billion if markets are favourable. That would match Bank of America’s market capitalisation, and be more than twice the size of Citigroup. Among U.S. banks, only JPMorgan Chase & Co. is bigger.
Ant says it will use the proceeds to expand cross-border payments and enhance its research and development capabilities, according to the filing, which didn’t provide a share price range or the amount it intends to raise.
The company will issue at least 10% of its total capital in new shares, according to the filing with the Shanghai exchange. Ant generated 72.5 billion yuan ($10.5 billion) in revenue in HI, after full-year sales of 120.6 billion yuan in 2019, it said. The firm posted a profit of 21.2 billion yuan in the first half of this year.
The crown jewel of the sprawling Alibaba empire, Ant has been accelerating its evolution into an online mall for everything from loans and travel services to food delivery, in a bid to win back shoppers lost to Tencent. With data from a billion users of its Alipay app at its back, Ant is pushing broadly into financial services, delivering technology such as artificial intelligence, robo investing and lending platforms.
Alibaba is Ant’s largest shareholder, with a 33% stake. Hangzhou Junao, an entity that is owned by key Ant and Alibaba executives, owns 20.66%, while Hangzhou Junhan, which holds shares on
Alipay Transactions
The preliminary IPO filing shed some light on Ant’s reach. Alipay’s total transaction volume reached 118 trillion yuan in the 12 months ended in June. The app had more than 1 billion users and 711 million monthly active users. More than 80 million merchants used Alipay to conduct business and Ant partnered with more than 2,000 financial institutions.
The company is also seeing a shift in its revenue structure, generating a greater contribution from technology services fees. The contribution from digital payments and merchants services fell 7.1 percentage points to 35.9% in the first half from the end of last year.
Its digital finance technology platform, which includes services credit, investment and insurance tech operating under the brands including Huabei, Jiebei and Yu’E Bao, accounted for 63.4% of revenue in the first half, up from 56.2% at the end of 2019.
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