By Stella Yifan Xie in Hong Kong
Once seen as a disrupter of China's banking system, Jack Ma's
financial-technology behemoth Ant Group Co. is becoming a national
champion for the country as it prepares to go public with much
fanfare.
Hangzhou-based Ant, one of the world's most valuable technology
startups, on Monday said it is planning initial public offerings on
stock exchanges in Hong Kong and Shanghai, skipping New York while
trade and political tensions flare between the U.S. and China.
The news was timed to roughly coincide with the one-year
anniversary of Shanghai's own Nasdaq-style STAR market, which top
Chinese officials have been trying to nurture as a listing venue
for homegrown technology stalwarts.
"It's like having Apple on Nasdaq," said Fred Hu, founder of
Beijing-based Primavera Capital Group, a private-equity firm that
has invested in Ant since its early days. He said Ant's listing at
home will be a huge boost for the young bourse, and will also help
solidify Hong Kong's status as an international hub for global
capital.
For years, China's biggest and fastest-growing tech companies
bypassed their home market and flocked to raise funds in New York
or Hong Kong. Their listings abroad deprived many individual
investors in China from profiting from their subsequent stock-price
gains.
The tide is now turning. Ant, which owns the popular Chinese
mobile payments network Alipay, is poised to become the first
Chinese company to list its shares concurrently in mainland China
and offshore in Hong Kong. Back in 2018, smartphone maker Xiaomi
Corp. tried to do the same but ended up listing only in Hong Kong
after running into regulatory hurdles onshore.
Employees and other shareholders of Ant -- including
state-backed Chinese funds, state-owned enterprises and global
investment firms -- are now positioned to reap a windfall when the
company goes public.
Mr. Ma, who founded Alipay when he was running Alibaba Group
Holding Ltd., owns 8.8% of Ant, according to Alibaba's latest
annual report. On Monday he paid a visit to Ant's headquarters and
met with some employees, who surrounded him and took photos.
Ant never considered going public in the U.S., according to a
person familiar with the company, even though Alipay's former
parent Alibaba successfully raised $25 billion in a 2014 IPO on the
New York Stock Exchange. The person said Ant's goal was always to
list closer to home.
Ant's coming IPOs could be among the world's largest in history.
The company was valued at $150 billion in a private fundraising
round in 2018, and is aiming for a market valuation in excess of
$200 billion, the person familiar with its plans said.
That would propel Ant into the ranks of the most valuable
financial services companies globally. In the U.S.,
payments-processing giant Mastercard Inc. has a market
capitalization of $313 billion, while PayPal Holdings Inc. is worth
$210 billion following a sharp run-up in its shares this year.
Goldman Sachs Group Inc., in comparison, has a market cap of $73
billion.
Ant, however, has been trying to shed its image as a financial
company. Over the past few years, the company has been trying to
compete less with banks and other traditional financial
institutions in China, and position itself more as a technology
provider to a wider range of businesses in the country.
That has helped reassure regulators that the company doesn't
pose a threat to China's financial system, analysts say. Last
month, it changed its name from Ant Financial Services to Ant
Group, and said 60% of its employees now work in technology-related
jobs.
"I think that kind of positioning is much better for Ant, as
long as regulators view them as a positive for the entire financial
industry rather than a competitor against existing players," David
Dai, an analyst at Sanford C. Bernstein, said in an interview
Tuesday.
Bernstein estimates that Ant's revenue was close to 140 billion
yuan ($20 billion) in 2019, up sharply from around 100 billion yuan
the previous year. About half of Ant's revenue came from its
payments business, and that percentage is likely to drop in the
coming years, it said in a November 2019 report.
Ant's origins date back to 2004, when Alibaba created Alipay as
an escrow service for online shoppers on its e-commerce websites.
In 2011, Alipay was spun out of Alibaba and expanded into a
ubiquitous payments provider that let Chinese citizens make
everyday purchases using their mobile phones.
The company known as Ant was established in 2014 to encompass
Alipay and other financial services including personal credit
lines, small-business loans, insurance and investment products.
Alipay also created what quickly became the world's largest
money-market mutual fund, but in the process rattled some banks as
millions of people diverted funds from their bank accounts into the
high-yielding fund.
The rapid growth of Ant's flagship money-market fund also
unnerved regulators, which pressured the giant fund to slow inflows
and reduce risk among its assets. The fund known as Tianhong Yu'e
Bao has shrunk in size, but more than 600 million people --
representing more than a third of China's population -- are still
invested in it. Ant now also sells similar funds managed by other
investment firms.
Ant's relationship with financial institutions is now more
"collaborative," as most of the loans it makes come from banks'
balance sheets, rather than its own, said Mr. Dai of Bernstein.
Within Ant, a long source of pride for many employees has been
the company's leading edge in mobile payment technology, one of the
few areas of technology where China leads the West.
In the U.S., PayPal, Apple Inc.'s Apple Pay and other
online-payments networks have long tried to get consumers to switch
to using their mobile phones for payments, but take-up rates have
been low compared with China.
Along with its rival, Tencent Holdings Ltd.'s WeChat Pay, Ant
pioneered an era in China where mobile payments became the dominant
form of transacting both online and in physical stores.
Today, Alipay has more than 900 million active users in China
and handled nearly 54% of the country's 204.8 trillion yuan ($29.3
trillion) in mobile-payment transactions last year, according to
market research firm Analysys.
In a Monday letter to Ant's more than 12,000 employees
announcing the company's listing plans, Executive Chairman Eric
Jing advised staffers to remain calm and focused on the company's
mission of solving problems and providing solutions to individuals
and businesses. "Stay humble," his letter said in Chinese.
"An IPO has never been our end goal, but rather an important
step in the evolution of our company and the fulfillment of our
vision," Mr. Jing wrote.
--Jing Yang contributed to this article.
Write to Stella Yifan Xie at stella.xie@wsj.com
(END) Dow Jones Newswires
July 21, 2020 08:56 ET (12:56 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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