Ant Group poised for one of 2020’s biggest IPOs

Alibaba's payments arm Ant Group, which has most recently been valued at $150 billion (€131 billion), has announced its long-awaited public offering with a dual listing in Shanghai and Hong Kong.

Ant, which was founded by Jack Ma, has grown into China's dominant mobile payments company with 900 million annual users. But it has also run into regulatory concerns about its outsized role in the financial sector and about its profitability.

A senior Ant executive, who did not wish to be named, said the company had waited to announce its listing in order to “secure the full support of Beijing”.

The company did not provide a timeline for its listing or say how much money it wants to raise. One person close to Ant suggested the process was in its early stages. A listing of even a small portion of its shares would represent one of the biggest IPOs of an Asian company.

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Transparency

“Becoming a public company will enhance transparency to our stakeholders, including customers, business partners, employees, shareholders and regulators,” said executive chairman Eric Jing.

Ant said it would pursue a dual listing both in Hong Kong and on Shanghai’s one-year-old Star board, an exchange focused on technology that China hopes will rival Nasdaq.

The company was last valued at $150 billion in mid-2018 after raising around $14 billion from investors including Temasek, General Atlantic, Warburg Pincus and Baillie Gifford.

In recent transactions in secondary markets, small blocks of shares have changed hands at levels that imply a valuation of upwards of $200 billion, according to several people familiar with the matter. PayPal, the US fintech company is valued at $204 billion.

Ant has recently changed its name from Ant Financial to Ant Group, and has repeatedly stressed that it is a technology company, rather than a financial one.

But it retains a hefty footprint in China’s financial system, with more than 600 million users depositing funds into its Yu’E Bao money market fund. Providing digital financial services like wealth management, online lending and insurance contributed more than 50 per cent of its revenue in the year to the end of March.

Ownership

Its Alipay app has slowly turned into a “superapp”, or a hub for its growing ecosystem of services, from restaurant reviews to online shopping on Alibaba’s Taobao marketplace.

In 2011, Jack Ma transferred Alipay – as Ant was then called – out of Alibaba into an entity that he controlled, triggering a dispute with Yahoo and SoftBank, two of Alibaba's largest shareholders at the time. Mr Ma said it was to comply with Chinese regulations prohibiting foreign ownership of financial businesses.

Mr Ma maintains his controlling stake in the company, but last year Alibaba swapped its right to 37.5 per cent of Ant’s pre-tax profits for a 33 per cent equity stake after gaining approval from regulators.

The company has not yet made public its financial statements but Alibaba books some of its profit after a delay of one quarter, providing an estimate of its earnings.

Alibaba’s first quarter financials implied Ant had an estimated Rmb15.5bn ($2.2 billion) of profit during a slightly lengthened fourth quarter last year. – Copyright The Financial Times Limited 2020