(WSJ) Chinese financial-technology giant Ant Group Co. is set to raise at least $34.4 billion from the world’s biggest-ever initial public offering, filings showed Monday, in a blockbuster deal that will bypass U.S. stock exchanges.
The mammoth IPO, which spans Shanghai and Hong Kong, adds to an already frenetic year for China’s capital markets, which are enjoying a boom in share sales despite heightened tensions with the U.S.
Ant is seeking to raise about $17.2 billion in each city, based on prices of 68.8 yuan and HK$80 respectively per share, according to regulatory filings. Ant could raise up to a maximum of about $5.2 billion more, if underwriters exercise their option to purchase up to 15% more shares in an arrangement known as a green shoe.
Those sums would eclipse the $25 billion raised in 2014 by its former parent Alibaba Group Holding Ltd. and the $29.4 billion of shares sold more recently by Saudi Aramco, in what is to date the largest-ever IPO.
The price values the Hangzhou-based group at about $313 billion, after including the new capital raised but before any green shoe. In comparison, Mastercard Inc. was worth about $330 billion as of Friday’s close. A private fundraising in 2018 valued Ant at $150 billion.
Jack Ma, who controls Ant, said over the weekend the IPO will be “the largest in human history.” Speaking at a financial forum in Shanghai on Saturday, he said: “This is the first time that such a big IPO was priced outside of New York City, which we wouldn’t have dared to think about five, or even three years ago.”
In a few years, Ant has helped change how people in China spend, borrow, save and invest. The firm, which has its origins in an escrow service for Alibaba’s e-commerce websites, now processes trillions of dollars in payments annually, runs one of the world’s largest money-market funds, and facilitates small loans to hundreds of millions of consumers and small businesses.
“This company has single-handedly modernized China’s financial infrastructure,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics.
As it has grown, Ant has drawn attention from banks and authorities. Financial regulators pressured Ant to tame the growth of its giant money-market mutual fund, Yu’e Bao, which was originally created to enable users of its mobile payments app, Alipay, to earn returns on spare cash in their digital wallets. Ant’s earlier ambition of developing a credit-scoring system was also thwarted by China’s central bank.
In recent years, Ant has emphasized its focus on technology, dropping the term “financial services” from its name. It has positioned itself as a partner for banks that helps assess credit risk and offers lenders access to its more than 700 million monthly active users in China.
Its Hong Kong stock will start trading on Nov. 5, according to a filing with that city’s stock exchange. Although Ant didn’t provide a Shanghai listing date yet, it is expected to be on the same day.
Bankers have been rushing to price Ant’s IPO before the U.S. election to get ahead of potential market volatility, according to investors who attended roadshows. The State Department recently proposed to an interagency panel that Ant be put on a trade blacklist.
The deal is the first concurrent listing in Shanghai and Hong Kong for a decade, and the largest listing to date on Shanghai’s fledgling Science and Technology Innovation Board, a Nasdaq-style board that is also known as the STAR Market. Inside Ant, the code name for the IPO was “Project Star.”
Ant has already finished selling shares in Shanghai, with 80% of the offering going to so-called strategic investors, who will commit to hold the shares for at least 12 or 24 months. That proportion is a record for the STAR Market. Investors seeking to buy the remaining 20% of shares in Shanghai placed orders exceeding the stock on offer by more than 284 times, according to its filing.
On Monday, shares were already oversubscribed less than an hour after the order book was open for institutional investors in the Hong Kong leg of the IPO, according to a person familiar with the matter.
Strategic investors in the Shanghai shares include China’s national pension fund, and a slew of investment funds affiliated with China’s state-owned firms, insurance companies and banks, as well as mutual funds.
Foreign buyers include Singaporean state investors GIC Private Ltd. and Temasek Fullerton Alpha Pte. Ltd., the Canada Pension Plan Investment Board, and the Abu Dhabi Investment Authority.
Alibaba will also buy 51.1 billion yuan worth of shares, equivalent to $7.6 billion, to maintain its stake at around one-third of Ant. Mr. Ma and members of Ant’s top management will collectively own 39.5% of Ant after the IPO, before the exercise of any green shoe.
The record-breaking deal will bring in hefty fees for a number of investment banks. Citigroup Inc., JPMorgan Chase & Co., Morgan Stanley and China International Capital Corp. have top billing as joint sponsors of Ant’s Hong Kong IPO, while CICC and China Securities Co. are joint sponsors of the Shanghai share sale. In total 25 institutions are working on the Hong Kong share sale, and six on the Shanghai tranche.
Source: Wall Street Journal by Stella Yifan Xie and Jing Yang
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