Four Things to Know About Ant Group
Ant Group has officially launched preparations for a long-foreshadowed public offering with a dual listing in Hong Kong and Shanghai, bypassing the New York Stock Exchange amid growing acrimony between China and the U.S.
Valued at $150 billion by a 2018 funding round, even if Ant Group lists only a small portion of the company, the blockbuster twin IPO is likely to be China’s largest this year.
China International Capital Corp. and JP Morgan are underwriters on the float, which comes even after Ant Group earlier this month sought to downplay rumors it would sell a 5% to 10% share and target a $200 million valuation.
Founded by Chinese billionaire Jack Ma in 2004 as Alipay, a mobile and online platform to facilitate payments on Alibaba’s e-commerce site, the company got in on the ground floor of — and in many ways shaped — China’s financial services industry.
In 2011, Ma controversially spun off Alipay as Ant Financial, combining several businesses into one under his control in order to skirt restrictions on granting third-party payment licenses to foreign-funded companies. Foreign shareholders Yahoo! Inc. and Softbank Corp. objected.
It has since swelled to span microlending and insurance, credit scoring and the country’s largest money market fund.
Caught up in a broader risk crackdown, the Alibaba affiliate has more recently sought to reframe itself as a technology provider. Even as Ma resigned last year as executive chairman of Alibaba Group Holding Ltd., he has retained at least a 50% voting stake in Ant Group.
Here are four more things you should know about the company.
1. What is Ant's ownership structure?
As of July, Jack Ma jointly controls at least 50% of Ant Group under a complex agreement involving two equity investment firms dating back to 2011.
Alibaba does not control Ant Group, but it took a 33% equity interest in the company under an asset restructuring plan in September.
In 2019, when Alibaba filed for its secondary listing on the Hong Kong Stock Exchange (HKSE), Ma announced plans to reduce his stake in Ant Group to less than 8.8%.
2. What business does the company do?
Ant Group grew around third-party payment platform Alipay, which remains at the core of the company with 1.3 billion annual active users as of March. It has secured a large and at times controversial hold over the Chinese financial services market, through businesses in payments, microfinance and wealth management.
According to iResearch, Alipay held 54.2% of the mobile payment market in the second quarter of 2019, significantly more than the 39.5% controlled by Tencent Holding Ltd.’s WeChat Pay. The duopoly was responsible for nearly nine out of 10 mobile payments in China’s $8.3 trillion market by the end of last year.
But the company has since 2018 sought to reframe itself as a technology provider rather than a financial services firm after being embroiled in Beijing’s online financial risk crackdown. Most literally, the company dropped “Financial” from its name and become Ant Group earlier this year.
About half of Ant Group’s revenue is now understood to come from technology services provided to clients such as merchants and finance firms.
It has also been leaning hard into the development of blockchain technology, partly to secure transactions, and holds more than 200 patents on the technology, according to the China Patent Protection Association.
3. What licenses does it hold?
Ant Group owns several highly sought after internet finance licenses that allow it to offer third-party payment services and microlending businesses on the Chinese mainland.
The company has expanded its internet finance businesses through investing, acquiring, co-funding and buying shares of mutual funds, banks and insurance companies.
4. Why is it going to list in Shanghai and Hong Kong?
Ant Group’s choice to list on the HKSE and Shanghai’s STAR Market follows the trend of Chinese companies trading closer to home as they face growing scrutiny in the U.S. It also comes as Hong Kong and the Chinese mainland have fallen over themselves to make listing in their jurisdictions more attractive to tech giants and innovation companies with weighted voting rights and less restrictions on market-driving pricing.
The Hong Kong Stock Exchange amended its rules in 2018 to allow listings by companies with dual-class shares and abandoned the “one share, one vote” rule for individual stakeholders, in a move favored by tech companies as it allows founders to retain control. That was four years after Jack Ma turned to New York for Alibaba’s 2014 listing.
Meanwhile, the Shanghai Stock Exchange founded the STAR Market one year ago as a technology-focused exchange it hopes will one day rival the Nasdaq.
Ant Group’s dual listing in Hong Kong and Shanghai is a sign the stock markets in both financial hubs are considered mature, and is a boost of confidence for global investors to trust the world’s second-largest capital market, said Pang Min, chief economist at a Beijing-based financial institution China Renaissance.
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