By Emily Bary
Ant Group is headed for the largest initial public offering in history, as the Chinese financial-technology juggernaut chases a valuation that would rival the biggest payments companies in the world.
The Alibaba Group Holding Ltd.–affiliated company controlled by Jack Ma is listing its shares concurrently on the Hong Kong and Shanghai exchanges. Ant, which runs China’s immensely popular Alipay mobile wallet, is set to raise about $34.5 billion through the offering. The company priced its Hong Kong-listed shares at HK$80 a share and its Shanghai-listed shares at 68.8 yuan .
Trading is expected to begin Nov. 5.
Ant’s IPO is gearing up to be larger than that of Saudi Aramco, which brought in more than $25 billion in the biggest IPO to date. Ant said in a prospectus that its offer price of HK$80 a share implies a market capitalization of HK$2.43 trillion, which equates to about $310 billion. That valuation would mean Ant is worth more than Bank of America Corp. /zigman2/quotes/200894270/composite BAC -2.56% ($210 billion), PayPal Holdings Inc. /zigman2/quotes/208054269/composite PYPL +1.89% ($231 billion) and JPMorgan Chase & Co. /zigman2/quotes/205971034/composite JPM -2.53% ($306 billion), but less than Mastercard Inc. /zigman2/quotes/207581792/composite MA +0.04% ($316 billion) and Visa Inc. /zigman2/quotes/203660239/composite V -0.75% ($407 billion).
The company is best known for its mobile-payments offering, but it aims to be a one-stop financial hub that also provides access to wealth management, investing and insurance services. Analysts view the payments portion of the business as a gateway that brings users in to Ant’s more complex offerings.
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Unlike Western mobile wallets, Ant’s platform touches on nearly all aspects of one’s financial life. Ant goes beyond what PayPal and Apple Inc.’s /zigman2/quotes/202934861/composite AAPL -1.01% Apple Pay do, offering services for everything from payments to credit to insurance to investments within Alipay, which the company calls a “ubiquitous super app.” Ant counts more than a billion annual active users for the Alipay app and 711 million monthly active users.
The Alipay app is “synonymous with digital payments in China,” Ant said in its filing. Bernstein analyst Kevin Kwek sees the payments component as a “hook product” for the company that may have limited profit potential but helps the company bring in new users who can then try out more lucrative services.
App-based payments are commonplace in China, even for in-person transactions, and this is perhaps the most well-known aspect of Ant’s business. But other areas of the business are more interesting, Bernstein’s Kwek argued in a note to clients, particularly the company’s credit business, in which Ant originates loans that are almost entirely underwritten by financial partners, giving the company useful loan insights without requiring it to take much balance-sheet risk.
The credit business is “maybe the gem” of Ant’s business, Kwek wrote. By his math, with a “conservative” assumption that the company only made one loan to each of its 500 million loan customers over the past 12 months, Ant would have originated 16 loans per second.
“Everyone has heard of the ‘fintech model,’ where data insights from online activities will be used for underwriting and everything will happen digitally (and quickly, even instantaneously),” he wrote. “But to witness the growth at this scale was indeed a surprise.”
Ant also offers investment services through the distribution of money-market funds, as well as wealth-management and insurance options.
Alibaba /zigman2/quotes/201948298/composite BABA +0.33% /zigman2/quotes/215329847/delayed BABAF +1.85% /zigman2/quotes/215112034/delayed HK:9988 +1.57% previously had a profit-sharing arrangement with Ant in which Alibaba received 37.5% of the company’s pretax profits, but Alibaba announced in early 2018 that it would be switching to an equity structure. Now, Alibaba has a 33% stake in Ant through its subsidiaries, a move that analysts thought would help the Chinese e-commerce giant benefit from a potential Ant IPO down the line.
“Equity ownership allows us to participate in the long-term value creation of Ant Financial as opposed to the quarter-to-quarter fluctuations of a profit share,” Executive Vice Chairman Joseph Tsai said on the company’s earnings call at the time.