- Ant Group, an affiliate fintech company of Chinese retail behemoth Alibaba, has been gearing up to go public with an anticipated valuation of around $US300 billion.
- The company was formed in 2014 to run Alipay, a ubiquitous digital payment service used by millions of Chinese shoppers.
- Ant Group was initially scheduled to begin trading in China this week, but its IPO was suspended after Chinese officials conducted regulatory interviews with the firm and found “major issues” that may not qualify Ant for a listing.
- Here’s what we know about Ant Group, whose IPO could catapult the fintech firm past the world’s most established financial institutions, like Goldman Sachs.
- Visit Business Insider’s homepage for more stories.
Although around 1 billion people in China use Ant Group’s mobile payment services, many people likely have never heard of the tech affiliate company of Jack Ma’s Alibaba.
Ant Group is the world’s most highly valued fintech company, and it’s been prepping for an initial public offering in China, with trading initially scheduled to begin on November 5, according to regulatory filings. But Chinese officials met with Ant Group on Monday for “regulatory interviews,” per CNN. Authorities in Shanghai concluded that Ant’s listing posed “major issues” and suspended the IPO, and Ant Group said Tuesday that it would also pull its IPO in Hong Kong.
It’s unclear if or when the IPO, which has been touted as the largest in history, will be rescheduled.
Here’s what we know about the Chinese fintech juggernaut, which is ready to overtake the world’s most famous banks with its IPO.
Ant Group is an affiliate company of Alibaba, the nation’s leading consumer retail giant
Some have referred to Alibaba as “The Amazon of China,” and while both Alibaba and Amazon are ecommerce powerhouses in their respective home nations â€” and are going head to head in international markets â€” there are some differences between the two.
Alibaba is parent to 14 core units, including its B2B retail site Alibaba.com, and consumer retail marketplaces Taobao and Tmall
Ant’s origins begin with Alipay, which is now one of China’s most popular and ubiquitous apps that includes a digital payment service, not unlike PayPal in the US. Alipay was founded in 2004 to serve specifically as a payment service for customers checking out on Alibaba’s online marketplaces.
Alipay was spun out of Alibaba in 2011, and has since acted as an independent mobile payment service, expanding not only to a wider swath of the Chinese public but also internationally, like in Vienna. A holding company called Ant was formed in 2014 to serve as not only the parent company to Alipay but also to other financial services, like loans and wealth management.
Then-Ant CEO Eric Jing told Think Business in 2017 that the company named itself after the small insect because it serves “the little guys.”
In 2018, Alibaba bought out a 33% stake in Ant, according to the Nikkei Asian Review.
Alibaba: The Chinese holding company founded by Jack Ma in 1999 whose retail sites dominate the country’s retail industry.
Ant Group: An affiliate company of Alibaba formed in 2014 to serve as the parent to Alipay, as well as other financial services. Jack Ma, Alibaba founder, maintains a controlling stake in Ant Group.
Alipay: A digital payment service kicked off in 2004 that has skyrocketed from Alibaba’s own secure payment processor to a de facto check-out app for the general Chinese public.
Jack Ma: Alibaba founder and one of the richest people in China, with a net worth of almost $US50 billion.
Just don’t call Ant Group a finance firm
Ant has recently been attempting to shift the optics of the company from financial firm to technology services provider. The company wasn’t even called Ant Group until June â€” before then, it was Ant Financial Services.
That’s because the company has veered into the business of some Chinese banks, siphoning off millions of customers and landing in hot regulatory water in the process. It specifically hosted a money-market fund, a type of low-risk mutual fund, that became the largest of its kind in the world â€” more than 600 million people are invested in it, or a third of China’s entire population as the WSJ reports. The mutual fund was reportedly dubbed a “blood-sucking vampire” for the bite it took out of the Chinese financial system.
And if Ant’s IPO were to go as some analysts have been predicting, other established financial institutions â€” like Wells Fargo and Goldman Sachs â€” could be left in the dust. Ant was reportedly shooting for a market valuation of more than $US200 billion. For comparison, Goldman Sachs has a market capitalisation of $US73 billion.
Ant’s IPO could be one of the biggest initial public offerings in history
Ant’s last notable fundraising round was in 2018, according to CNBC, when the firm raked in $US14 billion from investors to beef up its global Alipay service. That bloated its valuation to $US150 billion.
Its dual-listing IPO was expected to raise $US34.5 billion for the firm, making it the largest listing in the world. Its valuation sits at $US280 billion but the IPO could have bloated that figure to over $US300 billion.
“It’s like having Apple on Nasdaq,” Primavera Capital Group founder Fred Hu, whose private-equity firm moved in quick to back Ant early on, told the Wall Street Journal.
However, it’s now unclear when the company will be able to move forward with its public listing.
The startup skirted a listing on the New York Stock Exchange as US-China relations grow continually strained
Ant opted for a dual listing in Hong Kong and Shanghai, glossing over the NYSE, though a source told the WSJ that the company always intended to only list in China.
But the move still comes as Chinese tech firms stand in the crosshairs of strained relations between the eastern nation and the US. Lawmakers are increasingly uneasy about the Chinese government having access to user data through Chinese tech platforms.
The US has taken aim at the ultra-popular video sharing TikTok app in recent months, which is owned by the Chinese tech behemoth ByteDance. The House of Representatives has voted to ban the app from all federally-issued devices, and TikTok has filed a lawsuit against the US government challenging an executive order issued that bans transactions between it and US firms. In the UK, the government has placed a ban on 5G network equipment from Chinese telecom giant Huawei, and the US is similarly working to distance itself from the company.
And in early October, news surfaced that the Trump administration was considering restricting both Ant Group and fellow Chinese giant Tencent in the US over national security concerns. Business Insider viewed and downloaded it through Apple’s App Store, but a spokesperson told us that the Alipay app is currently unavailable for American users in the US unless they have a Chinese bank account.
PayPal vs. Ant Group
PayPal Holdings operates in more than 200 markets worldwide and gobbled up almost 14.5% of the fintech market in 2019, per a June report from The Business Research company. Ant Group had 8% of the total share that year and now operates in over 50 markets. Other competitors, like Tencent, Square, and Shopify, trailed behind.
PayPal went public in 2002 and now sits at a $US205 billion market cap in the US. And while it may be the leading mobile payment service in the US, when PayPal moved into the Chinese market in 2019, it found itself a small fish in a big pond as Fortune reports. Ant, along with Tencent’s WeChat, dominated 90% of the market at the time. Alipay officially moved into the US market in 2017, initially to allow Chinese customers in the country to shop without worrying about exchanging currency, as The Verge reports.
As both companies continue to expand, the tense ties between the Trump Administration-led US and China will likely continue posing obstacles to Ant’s move into the American market, per a Quartz report. In 2018, the US threw out Ant’s attempt to acquire MoneyGram, a money transfer firm, over national security concerns.