Caixin
Oct 27, 2020 08:41 PM
FINANCE

Ant Group Picks 29 Strategic Investors for Shanghai Leg of Record IPO

Fintech giant Ant Group Co. Ltd., which is set to make history with the world’s largest ever IPO, has chosen 29 strategic investors, including four foreign companies and China’s social security fund, for the Shanghai leg of a dual listing that’s aiming to raise a whopping $34.5 billion.

The cohort, which also include several state-owned enterprises and e-commerce behemoth Alibaba Group Holding Ltd., will get 80% of the 1.67 billion shares being sold on the high-tech STAR Market before any overallotment option, according to an Ant Group filing (link in Chinese) with the Shanghai Stock Exchange Monday. Under stock market regulations for the new board where Ant Group will be traded, the investors are barred from selling their shares for a minimum of 12 months.

Ant chart-1

Other institutional investors, who are buying for their funds, were allotted 16% of the shares on offer and the filing showed demand was overwhelming. In the preliminary price consultation, subscriptions were received for more than 76 billion shares, 284.5 times the amount on offer, it said. Companies and retail investors, the mom-and-pop shareholders who dominate stock market trading, got just 5% of the available shares through an online offering.

Ant Group is also selling 1.67 billion shares in Hong Kong, with 97.5% going to institutional buyers just 2.5% to retail investors. Two foreign fund sources told Caixin that the Hong Kong offering to institutional investors has been oversubscribed. The shares were priced at 68.8 yuan ($10.30) each in Shanghai and HK$80 ($10.30) in Hong Kong, and will begin trading concurrently on the two exchanges on Nov. 5, according to the company’s filing (link in Chinese) with the Hong Kong Stock Exchange. The company may raise another $5.17 billion if it exercises what’s known as a greenshoe option to sell additional shares to meet demand.

Ant Group’s combined Shanghai and Hong Kong IPO will surpass oil giant Saudi Aramco’s record $29.4 billion offering which took place at the end of 2019. The Hangzhou-based company will have an initial market capitalization of more than $310 billion, making it way more valuable than U.S. investment bank Goldman Sachs Group Inc. and just ahead of JPMorgan Chase & Co.

Alibaba, whose cofounder Jack Ma is the actual controlling shareholder of Ant Group, will be the largest strategic investor in the fintech group’s Shanghai IPO through its wholly owned subsidiary Zhejiang Tmall Technology Co. Ltd. It took 43.7% of the offering, paying 50.2 billion yuan for 730 million shares. China’s National Council for Social Security Fund, which was set up by the government to manage a reserve fund to supplement the state pension system, took the second spot, paying 6.9 billion yuan for 100 million shares. Other state-backed investors include a unit of China Merchants Group Ltd. and CNPC Asset Management Co. Ltd.

GIC Pte. Ltd., Singapore’s sovereign wealth fund, and the Canada Pension Plan Investment Board are the two biggest foreign strategic investors, each paying around 2 billion yuan for 28.6 million shares. Temasek Fullerton Alpha Pte. Ltd., which is owned by Singapore state-owned investment group Temasek Holdings Pte. Ltd., and the Abu Dhabi Investment Authority (ADIA), the sovereign wealth fund of the Emirate of Abu Dhabi, each paid around 1.5 billion yuan for 21.5 million shares. GIC and ADIA were cornerstone investors in the Shanghai IPO of Semiconductor Manufacturing International Corp., China’s largest chipmaker, earlier this year.

Temasek Fullerton Alpha also has stakes in Alibaba, the Industrial & Commercial Bank of China Ltd., and Meituan Dianping. Its investments in China surpassed those in its home market of Singapore for the first time at the end of March.

Although the strategic investors, who also include the subsidiaries of the IPO sponsors, will be able to sell their shares after 12 months, some, including GIC and Temasek Fullerton, agreed to accept a 24-month lock-up for half of the shares they hold, the prospectus showed.

Regulations covering the STAR Market require IPO underwriters and sponsors to invest in the shares of the companies they bring to the market for two years in order to curb risks. Ant Group had six underwriters and two sponsors for its Shanghai listing. China International Capital Corp. and CSC Financial Co. Ltd., the two sponsors, will hold their shares via their subsidiaries China CICC Wealth Management Securities Co. Ltd. and China Securities Investment Ltd.

Contact reporter Tang Ziyi (ziyitang@caixin.com) and editor Nerys Avery (nerysavery@caixin.com)

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