Jack Ma loves superlatives. The IPO of the financial component of his online group Alibaba probably suits his taste: It will be the largest in the world so far. Ant Financial wants to raise more than $ 34 billion from shareholders, the company announced on Monday. The financial services provider, which includes the payment service Alipay, even exceeded the record emissions of oil giant Saudi Aramco, which increased $ 29.4 billion last year.
Ant plans to list on the Shanghai and Hong Kong stock exchanges. Each is offering 1.67 billion shares, which will cost 68.8 yuan in Shanghai and $ 80 in Hong Kong. Ant wants to raise about $ 17.2 billion in both malls. The Hong Kong stock market is scheduled for November 5.
Despite her interest in superlatives, Ma was modest about the IPO: “We didn’t even dare to think about it five or even three years ago, but a miracle just happened.” It was only last week that it became clear that the Chinese Securities and Exchange Commission (CSRC) had announced green for the issue of Ant. Fintech has already obtained approval for an IPO in Hong Kong.
Ant Financial will intentionally not be disclosed in the United States
Jack Ma has picked up pace recently. In fact, he wanted Ant Financial to go public before the US presidential election on November 3. Fear of the outcome of the election could ruin investors’ buying spirits.
The fact that Ant is not going to any of the US stock exchanges now signals that the company does not want to get caught up in the queues of ongoing disputes between the US and China. In addition, the decision is in line with Beijing’s efforts to strengthen China’s financial center and increase the international attractiveness of domestic stock exchanges. Beijing last issued a directive stating that Chinese companies should no longer conduct their IPOs in the United States. So this year alone, $ 47.5 billion has been raised on the Shenzhen and Shanghai stock exchanges with a stock market debut.
Alibaba founder Jack Ma spun the financial part of his group at an early stage. Photo: AFP
Thanks to Ant Financial’s IPO, Ma is trying to replicate what it has already done in Alibaba: When the company became public on the New York Stock Exchange in 2014, it raised $ 25 billion – the largest IPO in history at the time.
Ant Financial has now separated Ma from Alibaba and established itself as a separate company. In addition to Alibaba itself, Temasek, a state investment fund from Singapore, and the American financial investor Warburg Pincus have also been involved since 2018.
Former English teacher Ma once carefully chose the name “Ant” (English for ants). His idea: a group of ants together achieve great goals. This has been shown to be the case in China, a country where almost no one pays in cash and where Ant, with his Alipay payment service, is one of the two largest providers of non-cash payments. Last year, more than a billion users paid through Alipay, not just through a payment application in China.
Alipay is also used in Germany
Before the corona pandemic, Chinese tourists used them to pay around the world – also in Berlin’s KaDeWe or in drugstores. Licensing services and software technology have helped fintech giant grow operating revenue by approximately 43 percent to $ 17.8 billion in the first nine months of this year. Because Alipay has an almost monopoly position in China and controls about 80 percent of the market. In 2019, payments totaling 110 trillion yuan (equivalent to 13.5 trillion euros) were processed. This is 25 times more payment transactions than PayPal, which is one of the largest providers of online payment platforms outside China.
Chinese customers can also pay via Alipay on KaDeWe. Photo: Thilo Rückeis
Al’s Alipay is already known as a payment service abroad, but many other financial products that Ant offers primarily to its Chinese users are not yet available. For example, products like Yue Bao, a fund in which younger Chinese in particular have invested their money in recent years, because interest rates around six percent have been significantly more attractive than those of traditional banks. Not only funds thrive, but the rest of the financial business also thrives. In this way, individuals in particular obtained loans that they would not receive from state banks. Since China’s central bank became responsible for all deposits on third-party payment platforms, interest rates on Ants Yue Bao funds have fallen to just over one percent, making them more attractive than savings accounts.
Many Chinese are over-indebted
However, success also has a disadvantage: Thanks to cheap offers, more and more people – mostly young Chinese – are in debt. So much so that they often could no longer repay their loan repayments. This, in turn, is reflected in their creditworthiness – which Ant Financial also checks through the Sesame Credit application.
Ma is defending his financial empire: In his view, banks in China would still operate with a “pawn shop mentality” that requires collateral and loan guarantees that would slow future growth. However, it wants to create a new, integrative and universal banking system that provides loans to small businesses and individuals on the basis of big data.
The money raised in the upcoming IPO Ant could go into this further development of data-based lending. Because if Ant has one thing in abundance, it’s data on the payment habits of his customers.