THE LEX COLUMN: Ant Group — Jack the giant maker
There is nothing modest about the Chinese fintech company’s Hong Kong and Shanghai dual listing
Ant Group started small. Its name comes from its commitment to serve individuals and small businesses. But there is nothing modest about the Chinese fintech company’s Hong Kong and Shanghai dual listing. The initial public offering is expected to raise $30bn. It will be the biggest of the year — perhaps ever.
Ant Financial Services Group, as it was formerly known, is controlled by Alibaba founder Jack Ma. It is reportedly seeking a valuation anywhere between $200bn and $300bn. That is larger than most global banks. It is three to four times the size of Goldman Sachs’s equity value.
There is every chance Ant, which was formed when the popular Alipay payments app was split from Alibaba, will succeed. A Hong Kong listing will allow the company to enjoy the surge of mainland Chinese funds into markets and the liquidity of foreign investors. Listing on Shanghai’s Star market — China’s answer to the Nasdaq — will win brownie points with President Xi Jinping.
The timing could not be better. Ant reported full-year revenue of more than ¥120bn and net profit of more than $2.5bn last year. Profit in the first half of 2020 exceeded that of the whole of 2019 at more than ¥21bn.
So far, Ant has also managed to emerge relatively unscathed from the pandemic, even if its quest to become a global name has run into trouble. A large chunk of Ant’s overseas business relies on the $127bn of annual Chinese tourist spending. That stopped as the pandemic deterred international travel. For the group as a whole, however, rising online spending will offset the decline.
Ant is right to ride the wave of successful Chinese tech listings. Chinese regulators are encouraging investors to buy equities — not that they need any urging. Funds are overflowing as Beijing boosts support and loosens regulations. The retail allotment of listings such as JD.com’s were oversubscribed 170 times.
At $200bn, Ant’s valuation would equal about 25 times expected earnings, according to analyst forecasts, a discount to US rival Paypal’s 48 times. Its payments business — which accounts for nearly two-thirds of China’s $7-trillion market — could justify that valuation alone. Higher-margin insurance and loans businesses are an extra boost. /London, August 25
© The Financial Times 2020
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