Ant Group, the ‘spun-out’ financial services arm of Chinese technology giant Alibaba, has received the green light from Hong Kong regulators for a planned $30 billion IPO. If all goes to plan, the float will be the largest ever in history. The Hong Kong stock exchange approved the IPO on Wednesday, paving the way for a dual listing in the city state and Shanghai.
The Ant Group IPO is expected to raise even more than Saudi Aramco’s $25.6 billion IPO in 2019, with a target of $30 billion expected to be met. The company itself is currently valued at as much as $318 billion by more generous analysts. There is a sense of urgency to get the IPO completed before the U.S. presidential elections on November 3rd, which are viewed as a potential catalyst for market volatility.
The plan is for the number of shares listed in Hong Kong and Shanghai to represent an even split, with around 1.67 billion on each. Combined, that totals around 11% of Ant Group’s outstanding shares. Bankers also have an additional overallotment option that they may exercise if demand is high enough.
Alibaba itself, the company that Ant Group used to be part of and was founded by and run by the latter’s CEO Jack Ma before he stepped down as CEO last year and from its board last month, is subscribing for 730 million of the shares listed in Shanghai. It will become a strategic investor through its Tmall subsidiary. Alibaba will own a total over 9.6 billion shares in its spin-off. Mr Ma, one of China’s richest men, is thought to personally own around $17 billion worth of stock in Ant Group.
Ant Group, which owns the Alipay online payments app as well as offering consumer loans and other financial services has been doing well over the Covid-19 pandemic, with revenues up over 42% between June and September.
Interest in participating in the IPO is high from both institutional and retail investors, with a strong share price leap expected on Ant Group’s market debut. Paul Schulte of Hong Kong-based equity researchers Schulte Research told the Financial Times:
“It’s not a matter of yes or no — it’s a matter of how much I can get. There’s so much demand, you’re going to be lucky to get 10 per cent of what you ask for”.
The Ant Group IPO is also a boost for the Hong Kong bourse itself, with the city positioning itself as the new international financial markets hub for Chinese tech companies. Several of the largest, including Alibaba itself, have opted for either sole or joint listings on the major Wall Street exchanges, in recent years.
However, with threats from Washington that Chinese technology companies would be excluded from Wall Street’s capital markets if they do not provide full access to their audit reports, many have either opted for dual listings in Hong Kong or China, or are placing greater emphasis on domestic listings they already had. Large Chinese technology companies are also unlikely to initiate new U.S.-based listings in the current political climate between the two economic superpowers.
Another bonus for Hong Kong itself is that popular Chinese technology shares listed on its stock exchange, trading in Hong Kong dollars, has increased demand for the currency, driving its value up. That has allowed the city state’s de facto central bank to sell around $37 billion in HK dollars this year, helping keep it within the strong end of its trading range with the USD.
As well as the Hong Kong listing, Ant Group will list on the Shanghai Stock Exchange’s tech-focused Star Market. The China Securities and Regulatory Commission has now approved both listings, paving the way for the IPO to take place next week, before the end of the month.