Ant Group, the world's largest-ever IPO, will launch in China and ignore New York and London
- Sale of just 11 per cent of the Alipay mobile payments service will raise upwards of US$34 billion
- November 5 flotation expected to be over-subscribed
- Much interest from the Middle East and Singapore investors
- New York and London markets mere bystanders as the world changes
What's sauce for the goose is sauce for the gander. If the US administration and Europe can bar Huawei and other Chinese technology companies from their markets, China can launch the world's biggest ever IPO in Shanghai and Hong Kong on November 5 and completely ignore the New York Stock Exchange and the global financial hub that is the City of London.
The floatation locally of the Ant Group, the company behind the Alipay mobile payments service that is ubiquitous across the whole of the People's Republic of China (PRC), is another indication of the increasing power of the country, its buoyant economy despite the Covid-19 pandemic and the confidence of billions of Chinese consumers. If this move develops into a trend, as it well might, it would to the detriment and discomfort of western markets and financial institutions.
The figures involved in the IPO are gargantuan. It is expected that it will raise US$34.4 billion when trading in Ant Group shares begin in Shanghai and Hong Kong in nine days time. And that's on the sale of just 11 per cent of the company. If the $10.30 initial expected price of a single Ant share is realised it will mean the company will be worth some $310 billion. That would make Ant as valuable as any old-established or new bank anywhere on the planet, including the US. Analysts say that there is such enormous pent-up demand from major institutional investors vying to buy into a share of the action that the price eventually achieved could well be in excess of $10.30 a share.
Ant Group is backed by Jack Ma, a former teacher of English who co-founded and was executive chairman of the multinational Chinese conglomerate the Alibaba Group and became a multi-billionaire in the process. Back in 2014, when Alibaba floated on the New York Stock Exchange, the IPO was worth $25 billion. Ant's launch in China will easily overtake that figure. Just yesterday Mr. Ma publicly castigated international financial regulations and institutions and said that they are not relevant to the current stage of China's economic development and that the PRC must and will plough its own furrow through the thickets and hedges seemingly designed permanently to keep outsiders away whilst cementing and maintaining western hegemony over the world's financial markets.
Alipay payments in China alone now top $17 trillion a year
Alipay is no flash-in-the pan or over-hyped overnight success. The third-party mobile and online payment platform has been in operation for sixteen years having been established in Hangzhou, Hubei province, in China in February 2004 by the Alibaba Group Five years ago Alipay moved its headquarters to Pudong, the high-rise financial centre of Shanghai, but Ant Financial, the parent company is still based in Hangzhou. Alipay was spun out of AliBaba in 2011 and its main tool and product is the digital Alipay Wallet that comes with a smartphone app allowing users to buy goods and services and conduct other financial transactions directly from their mobile devices. QR codes are used for local in-store payments.
There are over 1.3 billion Alipay users. In the year ending June 30, 2020 Alipay payments in China alone were in excess of $17 TRILLION! It is the world's premier mobile service company with more than a 65 per cent share of the third-party payment market and overtook Paypal as the world's largest mobile payment platform way back in 2013. So ubiquitous and powerful is it that Alipay is vital and utterly central to any business seeking to reach a critical mass of Chinese consumers both in China and, increasingly, overseas. The service is now available in Australia, Bangladesh, Canada, Iceland, Italy, Japan, New Zealand, Norway, Singapore, South Korea, the UK, Vietnam and even the US.
However the Trump administration is pondering adding the Ant Group to its "entity list" of companies banned from buying US goods and services - including technology. As part of the continuing trade war between the two countries and the concomitant breakdown in political relations, Trump personally has threatened to prevent any access by Chinese companies to US capital markets. The result is that the Chinese are floating companies in general and tech companies in particular on their domestic stock exchanges. Meanwhile the Alipay network is growing globally and now supports transactions in 20 foreign currencies to a lattice of partner banks and other financial institutions.
A listing "of huge significance"
In reality, as far as Chinese consumers are concerned, whether making purchases or paying bills at home or abroad, Alipay has all the attributes of a bank in that it functions as a credit card, a debit card and as a provider of loans to small businesses. It permits P2P money transfers, pre-pay top up for mobile phones, the purchase of train tickets, car hire and "digital identification document storage".(Well, in China, it would, wouldn't it?). It also has an insurance arm and provides investment advice and wealth management services as well maintaining a huge credit rating database.
Critics of Alipay, echoing complaints made in the west about western companies such as Facebook and Google, say it is too big, too powerful and too greedy and scoops up untold quantities of personal information on hundreds of millions of Chinese citizens and no-one knows (or is told) to whom that data is made available for archiving, interrogation and manipulation - although it is quite possible to make an informed guess. There are also grumbles that Alipay is an under-regulated and opaque anti-competitive de facto monopoly.
Speaking at the Bund Summit in Shanghai on Saturday last, Jack Ma said the listing will be "of huge significance" not only to Shanghai and Hong Kong but also to all of China and the rest of the world. He added, "This is the first time such a big listing, the largest in human history, was priced outside New York City. We wouldn't have dared to think about it five years, or even three years ago."
Oh yes, times are changing alright. E-commerce has already eclipsed many traditional banking and financial functions in the PRC. Cheques are a rarity, cash transactions dwindling even in corner shops and bars. Social media and digital infrastructure platforms are massive and massively important.
No wonder that investors from Asia and the Middle East, such as Temasek, the national Singaporean investment organisation, GIC, the investment corporation of Singapore. the Abu Dhabi sovereign wealth funds and Abu Dhabi Investment Authority. among others want to plough money into shares in Alipay; it's pretty much a racing certainty that they'll get a big Alipayoff in due course.
As for Jack Ma, who is already China's richest man, his shares in Ant Group will be worth $17 billion at floatation. Add that to his current wealth and he'll be sitting on a fortune of $80 billion - and rising. Like China.
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