Ant Group

Ant Group to Raise $34.5 Billion in World's Biggest IPO

Rebbeca Ren

posted on October 27, 2020 5:58 am

Ant Group, the fintech affiliate of Chinese e-commerce giant Alibaba, would raise $34.5 billion in the dual initial public offering, bringing its valuation to more than $313 billion. 

The company's parallel listings on the Hong Kong and Shanghai stock exchanges would mark the biggest float on record, beating Saudi Aramco's record-shattering $25.6 billion IPO.

Even Alibaba founder Jack Ma thought that the listing of Ant Group is a miracle. "It's the first time the pricing for such a big listing has been determined outside New York," the billionaire said at a conference in Shanghai on Saturday.

The price of Ant Group's shares listed in Shanghai will be 68.8 yuan each. By issuing 1.67 billion shares, it would raise 114.94 billion yuan or $17.23 billion in the Shanghai stock market.

The Hong Kong-listed shares have been priced at 80 HKD each, raising 133.65 billion HKD or $17.24 billion.

The Chinese company previously said that strategic investors have agreed to subscribe to 80% of its Shanghai-issued shares. Through its subsidiary Zhejiang Tmall Technology, Alibaba has agreed to buy 730 million shares in mainland exchanges, which will allow the e-commerce giant to maintain its roughly 33% stake in Ant Group. 

China National Social Security Fund Council, Singapore state investor Temasek Holdings, as well as Singaporean and Abu Dhabi sovereign wealth funds GIC and Abu Dhabi Investment Authority, will participate in the Shanghai IPO.

Meanwhile, five Chinese asset management companies said they would start raising a combined 60 billion yuan ($8.5 billion) for mutual funds that would take stock in Ant's IPO as strategic investors. 

Each fund holds no more than 10% of Ant's positions and will lock investors in for 18 months. Although these funds have been criticized for the long blackout period, they are still highly sought after by retail investors.

It is worth noting that Ant Group provides these five funds on its Alipay, the omnipresent digital wallet in China, and profit from commissions.

Since the dual listing application was submitted on August 25, Ant Group has continued to expand its offering scale. The company initially planned to raise approximately $30 billion, with a valuation of roughly $225 billion. However, in September, it reportedly boosted its valuation to $250 billion, aiming to raise $35 billion.

"It seems that Ant Group and the capital behind it are a bit greedy," said a person in charge of private equity who requested anonymity, "If its valuation is around $200 billion, then the stocks in the hands of investors in the secondary market will have great potential for appreciation. Currently, such a vast valuation means that the company's development in the next few years has been priced in, so the profit margin of the secondary market is quite limited." 

Mainland China's stock market is largely driven by retail investors, who tend to pile into stocks that are moving higher rather than paying attention to any fundamentals.

Ant Group was formed in 2014 to run Alipay, which has occupied 55% of the market share in China, and most of its revenue comes from financial services, including fast loans, wealth management, and insurance.

In the first half of 2020, Ant Group brought in 72.5 billion yuan ($10.5 billion) in revenue and scored a profit of 21.2 billion yuan ($3.1 billion).

According to the regulatory filing, Ant Group is expected to start trading in Hong Kong on November 5. The company has not disclosed when its Shanghai shares will begin trading.