Alibaba’s Supersized Ant: Fintech arm poised for one of the biggest IPOs of all time

July 29, 2020

3 min read

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What's going on here?

Ant Group, the fintech arm of Chinese e-commerce giant Alibaba, has kickstarted the process of a dual listing in Shanghai and Hong Kong. With Ant valued at over $200bn, it is one of the world’s most hotly anticipated initial public offerings (IPOs).

What does this mean?

Ant is the world’s most valuable tech “unicorn”; a startup valued at over $1bn. The fintech giant runs Alipay, China’s most popular mobile payment app with a 55.1% market share. It has also expanded into products such as wealth management, loans and insurance. Beyond that, it has been focusing on selling financial technology products to enterprise customers. Evidently, the company is an ant in name only.

Ant will carry out a simultaneous IPO on the Shanghai Stock Exchange’s STAR board and the Hong Kong Stock Exchange. The STAR board is China’s equivalent of the US’ Nasdaq (a tech-focused exchange). While Ant did not disclose the timeline or size of the listing, the outcome is likely to be one of the largest IPOs of all time. Ant’s last private fundraising round in 2018 priced the company at $150bn, but valuations by Wall Street analysts have surged since then to a mouth-watering $210bn. To put this into context, this would make Ant larger than some of America’s biggest banks – including Goldman Sachs and Wells Fargo.

What's the big picture effect?

As Ant gears up for its mammoth IPO, New York’s stock exchange is not being invited to the party. The decision to list only on Chinese financial markets could be a sign that the world’s tech giants are starting to choose sides as the US-China feud escalates. The current geopolitical tensions stem from trade wars, COVID-19 and China’s recent crackdown on Hong Kong’s autonomy (see our article on that here). One byproduct of these tensions has been the regulatory scrutiny of US-listed Chinese tech companies. Some US lawmakers, for example, are pushing to ban the social media app TikTok for security reasons. As momentum to delist US-listed Chinese companies builds, many of these companies have done secondary listings in Hong Kong to establish an investor base closer to home – Alibaba raised $12.9bn in a secondary listing in November 2019.

The increasingly hostile US climate has coincided with a more IPO-friendly environment in China. To compete with New York, Hong Kong made listing on its stock exchange more attractive to tech companies by welcoming those with weighted voting rights in 2018. Mainland China’s regulators launched Shanghai’s STAR board in 2019, which is more market-driven than other domestic exchanges. A simultaneous listing on these exchanges will help the not so small Ant Group fund its goal of digitising China’s service industry. It also plans to expand into global markets and invest in new technologies. By choosing to list close to home, Ant has given a major boost to the status of Shanghai and Hong Kong as global financial centres. The size and relevance of the tech titan means the decision to bet on the Chinese financial market should be a wake-up call for the US. As fears of getting caught in the US-China political crossfire persist, other Chinese tech companies may hedge their bets and avoid the US capital markets altogether.

Report written by Deniyi Coker

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