Updated: Ant Group IPO Suspended
Fiona Cincotta November 3, 2020 5:42 PM
In a surprise move China has halted the upcoming record breaking Ant Group IPO.
The Chinese financial technology giant was due to carry out a dual listing in Shanghai and Hong Kong which was set to raise $34.5 billion, making it the biggest IPO of all time.
Alibaba, Ant’s one third shareholder dived -6% on the news as the doubts over the future of Ant emerge. A meeting between Jack Ma, China’s central bank and top financial regulators is a clear sign that regulatory pressures are going to be increasing. Ant could be treated more like a bank than a tech firm, bad news for Ant.
The move by the authorities to halt the listing under the direct glare of the media could have even deeper repercussions. Alibaba is considered an example of how the Communist party in China has enabled entrepreneurs to flourish, in its political system. Could this move by the authorities cast a shadow over the financial markets in China just as Premier Xi Jinping is attempting to create stock exchanges that rival those of the US?
Ant Group in the financial arm of Alibaba, the e-commerce giant. Headquartered in the Chinese city of Hangzhou, Ant provides financial and payment services to over 700 million users, processing trillions of dollars every year. As you might expect with these huge fintech giants this is an all in one platform where users can spend, save, invest use credit or debit, in addition to the distribution of wealth management and insurance products. Over the past 12 months, ending in June Ant reported that it processed $17 trillion in digital payments, recording $18 million in revenue and $2.8 billion in profits.
Ant shares are expected to start trading in Hong Kong and Shanghai on November 5th, two days after the US election.
Demand has proved to be incredibly strong after Ant’s order books on the Hong Kong offering to institutional investors was oversubscribed just one hour after the launch. 97.5% of the Hong Kong shares will go to institutional investors. According to Reuters, Ant Group’s Shanghai retail book was 872 time oversubscribed as retail investors scrambled to get a piece of the world’s largest IPO. Fear of missing out can’t be ignored here.
Not Always Plane Sailing
We know from the likes of Facebook and even Alibaba, Ant’s one third shareholder, that these hotly anticipated IPO’s don’t always go as planned. FB’s 2012 $16 billion public debut saw the shares tumble 10% within the first two days of trading, which then took over a year to be clawed back to its $38 IPO price.
Meanwhile Alibaba popped 38% in its IPO. However, it then went from trading at around 44 times expected earnings to 22 the year after the IPO.
Ant has huge expectations to live up to. Broadly speaking Ant's future looks promising, but that doesn't mean that its immune from a short term swoon.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.