The Rise of the Ant

The long-anticipated IPO of Alibaba-affiliated Chinese fintech giant Ant Group could raise tens of billions of dollars in a dual-listing on both the Shanghai and Hong Kong exchanges.

Shares for the company formerly known as Ant Financial are expected to price at around HK$80, or roughly 68 to 69 Chinese Yuan. The company is selling around 134 million shares in the Hong Kong portion of its debut, worth around $17.25 billion American dollars at HK$80 apiece.

Given that the share sale is expected to raise a similar amount of money from its Shanghai listing, the company’s IPO could raise as much as $34.5 billion. That tally would make the debut the largest in history, besting the recent Aramco IPO that raised around $29.4 billion.

Alibaba owns a 33% stake in Ant Group. At its currently expected share price, Ant Group  would be worth as much as $310 billion, according to The New York Times, or $313 billion per CNBC.

Ant Group’s huge IPO fits its own epic scale. As TechCrunch reported in July, Ant had around 1.3 billion annual active users in March of this year, a number that could have risen in recent quarters. Ant’s Alipay competes with Tencent’s WeChat Pay in the huge and lucrative Chinese market.

The Ant Group IPO could be viewed as a moment in which the United States stock markets showed weakness. When Alibaba went public back in 2014, it did so via the New York Stock Exchange. The Chinese tech giant later dual-listed on the Hong Kong exchange. To see Ant Group dual-list on the Hong Kong and Shanghai indices without a float in New York shows what is possible outside of the United States when it comes to capital financing.

Fintech startups have broadly seen their fortunes rise during 2020 as the global pandemic changed consumer behavior and moved more commerce and payments into the digital realm. And IPOs have generally performed strongly as well, meaning that Ant Group could find a few tailwinds for its equity when it begins to trade.

Ant has not been content to stick to its knitting, keeping itself busy by investing in other startups. The company took a small stake in installment-payment service Klarna earlier this year, for example.

At a valuation of more than $310 billion, Ant Group would be worth about as much as JPMorgan Chase, the most valuable American bank today. It would also best U.S.-based digital payments leader PayPal, which is currently valued at $236 billion, as well as Square, which is valued at $77 billion.

3 things you should know about Ant Financial

  1. Over 1.3 billion users worldwide

The predecessor of the Ant Group is Ant Financial and its flagship product Alipay is a ubiquitous super app with more than 1.3 billion global users. In addition, Ant Group’s products involve money market fund Yu’e Bao, Sesame Credit, Ant Jubao, Internet Commercial Bank, Ant Xiaodai, Ant Financial Cloud, Yu’e Bao, Zhao Cai Bao, Ant Huabei, etc.

Alipay has continued to expand its scope of services, from information consultation, restaurant reviews, online shopping, and its service ecosystem continues to expand. In June, Ant changed its name from Ant Financial to Ant Group, emphasizing at the same time that it is shifting away from a financial to a technology company.

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In the most recent fundraising (mid 2018), approximately US$14 billion was raised from investors such as Temasek, General Atlantic, Warburg Pincus and Baillie Gifford. It has nearly reached 150 billion US dollars in total. Alipay’s counterpart, Paypal Company has a current market value of approximately US$209 billion.

2. Growth in China Digital Payments (Alipay)

Alipay is the largest digital payments services provider as measured by Total payment volume (TPV) in China, according to iResearch.

Innovations of Alipay app is synonymous with digital payments in China. The app has allowed Alipay to deliver unrivalled value and convenience to our customers, which has led to wide acceptance and popularity of e-wallet and massive transaction volumes. According to the prospectus, it has 711 million monthly active users and more than 80 million merchants today.

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3. Strong Financial Position

In the twelve months ended 30 June 2020, TPV transacted on Alipay platform in mainland China reached RMB118 trillion. It has earned 21.92 billion yuan ($3.2 billion) of 72.53 billion yuan revenues which rose 38% as compared to 2019 (Six months ended June 30).

Ant Group revenues come from various streams such as digital payment and merchant services, digital finance technology platform, including Credit Tech, Investment Tech and Insure Tech, innovation initiatives and others.

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Ant group financials has shown a gradual shift in revenue stream, moving from Digital payments and merchant services to Digital Finance technology platform. In 2017, its digital payment services accounted for 54.9% of its revenue. These come from transaction fees generated from merchants and transaction platforms based on a percentage of transaction volume from commercial transactions in China. However, it only accounted for 35.8% of its revenue in the first half of 2020.

Ant’s digital financial technology platform took a major 63.4% share by first half of 2020. By partnering with financial institutions, this newly superior platform provides customer a range of risk management solutions that cover SMB credit, investments and insurance.

Summary

Ant Group has grew from its initial payments service launched by Alibaba, building trust between e-commerce buyers and sellers, to a technology company today. Together with its strategic financial partners, the platform is able to provide a wholesome of services.

Alipay app popularity has continued to attract new users worldwide with its diversified streams of services such as wealth management, micro financing, insurance, and credit services.

With plans to further innovate and expand its reach with the proceeds from the listing offerings, Ant group is one of the most watch IPO in 2020. According to reports, it could become the largest IPO in history with the company seeking to raise USD $30 billion.

If you are scaling up your operations, then please get in touch to discuss requirements. Connectx source the top 5% of talent across the Fintech sector across the UK.

Alex – +44 7887 426 730 – alex@connectxpeople.co.uk

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