Log inAnt Group Set To Be The Largest Ever Stock Market Listing From Charlie Hancock
Ant, a Chinese financial technology company controlled by Alibaba’s co-founder Jack Ma, is currently making preparations for an initial public offering (IPO). In 2018, it was reported to be one of the most valuable private businesses in the world, after raising funding at a valuation of $150 billion.
Upon going public, Ant is expected to achieve a valuation of between $200 to $300 billion, putting it well in excess of the FTSE 100’s largest company, Unilever, which is valued at around $160 billion. With plans to raise $30 billion, it will be the largest ever IPO and almost double the $16 billion raised via the much-hyped floatation of Facebook. Whilst Ant may be relatively unknown in the western world, it’s easy to see why the IPO is generating such interest when looking at the group’s operations in China.
Ant Group’s largest underlying business is Alipay, a payment processing platform which handles more payments than Visa. In 2019, Alipay processed transactions worth $16 trillion, which represented a 20% increase on the previous year. Alipay was originally set up to process payments on the Alibaba website, in a similar way to PayPal on eBay. However, today, it’s difficult to draw comparisons between Alipay and the likes of PayPal, due to the way in which Alipay is driving growth in Ant Group’s various financial services businesses.
The Alipay platform allows users to access services ranging from wealth management and credit scoring, to insurance and personal loans. With almost 1 billion users in China, the potential customer base for these services is vast and the data gathered via the platform enables Ant to promote products and services which are tailored to a user’s needs. As well as enabling access to its own financial services, Ant has partnered with more established investment providers and insurers to offer third party services to Alipay users. Analysts that have studied the group’s operations in detail believe this integrated platform is unique and that Ant Group has the potential to change financial services globally.
In recent years, the group has started to operate outside of China, by developing relationships with payment processing businesses in India and Southeast Asia. Ant was also set to buy a US based money transfer company, MoneyGram, but the deal failed to win approval from US regulators who cited national security concerns. Political challenges aside, Ant appears well positioned to expand into other regions.
The expected valuation of Ant is not just based on potential however, with the group posting a net profit of $3 billion during the first half of 2020. With revenues for the same period being just over $10 billion, Ant appears to be generating healthy profits. This is in stark contrast to some technology companies which have taken part in high profile stock market listings, such as Uber. The taxi hailing mobile app floated some of its shares in 2019, but posted a loss of $8.5 billion across the year.
US firms have dominated the technology sector, but there are many innovative technology businesses flourishing elsewhere, with Ant being a good example. Profitability in the Chinese technology sector has been rising sharply in the last couple of years and within our portfolios we have selectively allocated to China funds which will benefit from this trend.