Ant Group Shows the Influence of Ecommerce with Largest-Ever IPO
While most companies are facing a financial crisis in this COVID-19 era, Ant Group, the highest-valued FinTech company of the world, hardly seems to slow down due to the pandemic. The affiliate company of the Alibaba Group in China has created history by making the biggest share sale ever.
On Monday, 26 October, Jack Ma’s Ant Group made the biggest IPO in history when it priced its listing to two popular exchanges, namely the Hong Kong Stock Exchange and the Shanghai Star Market. The price per share was 80 Hong Kong dollars ($10.32) on the former, and at 68.8 yuan ($10.26) on the latter, as per the regulatory filings released on that day.
As the news surfaces, Ant Group with this huge share sale is a big win not only for this Chinese tech company but also for the entire stock market of the country. Ant Group is reportedly gearing up for hitting an IPO record of $34 billion; the company will be given a value of more than $310 billion.
The previous highest IPO record was held by Aramco, a Saudi state oil company, in which it had raised $29.4 billion when it took its shares on the Riyadh exchange in December 2019.
Beijing believes that Ant group’s decision of selling 1.67 billion shares in both the exchanges will be beneficial in the near future as it will attract the institutional investors it has been courting for a long time.
The Ant Group IPO indicates how online payments are influencing and changing the ways of doing eCommerce in China.
Influential Tech Giant
Ant Group is a financial tech company affiliated with Alibaba, the Chinese eCommerce group. In 2014, Alibaba went public on the New York Stock Exchange, which was also a world-record making IPO. Following the success Ma had with Alibaba, Ant Group has become to be among the world’s most powerful tech companies. Due to the profit earned from the share sale, Ma now has complete control over Ant.
Ant has established a strong presence in almost all aspects of Chinese financial life, starting from micro-savings products and investments accounts to credit score, insurance sectors, and even various dating profiles.
As reported in regulatory filings in September, the company’s payments application, Alipay had gained 731 million active users every month, having a total reach of 1.3 billion users worldwide. This payment platform managed 118 trillion yuan in payments in a period of 12 months since June. Currently, according to Ant, Alipay is reportedly processing over $17 trillion in digital payments linked to China, as estimated for this period.
The company declared that it has earned about 43% increase in revenue to 118.2 billion yuan in the nine-month period till September. The gross profit gained for the period increased by 74% to 69.5 billion yuan.
Senior geotechnology analysts at Eurasia Group, Xiaomeng Lu, opined that Ant is expected to receive good benefits from the latest economic development plans of the Chinese government. He believes that Ant is considered as a “national technology champion”, marked by its investments in AI and blockchain, which according to him are the priorities for Xi Jinping, Chinese President.
Lu further noted that Ant Group faces tough competition within the country from the rival company, Tencent. Besides, potential regulatory pressure coming from other countries like the United States might limit Ant’s opportunities of growing or expanding abroad.
Coming back to the listed documents associated with Alipay, we can see that it has branched out from its initial services as an escrow between online buyers and sellers. Ant claims that Alipay now has over 80 million active merchants each month.
Ant further said that it aims at creating the required platform and infrastructure to provide full support to the service industry’s digital transformation. This flexibility means that firms have the power to expand their models in a horizontal line to efficiently add new offerings and services for their target markets that are already at scale.
As far as other stakes are concerned, Ant also has non-controlling interests in the popular Indian payment app, Paytm. As seen at the end of the previous year, Ant Group and SoftBank, a Japanese multinational conglomerate, together with a group of investors, is reported to invest $1 billion in Paytm, which is accelerating the growth of the Indian digital payments sector. This is expected to be as huge as $1 trillion by 2023.
Ant’s efforts are seen in the development of the Chinese ecosystem. Ant extends loans in CreditTech, which is further backed by 100 FI (Financial Institution) partners. The company declares that 98% of these FI partners are securitized or underwritten. Reports say that for the 6 months through 30 June 2020, CreditTech was responsible for 39.4% of sales.
On the other hand, InvestmentTech, the largest Chinese online investment platform, contributed about 16% of the total revenue. In its filings, Ant notes that it uses AI (artificial intelligence) for matching investors with the required financial products defending on risk profiles. Looking at the success of InsureTech in the 6 months ending in June, it covers health, life, property, and casualty with 4.1 trillion RMB, and represented 16% of sales in the said period.
Such growths are a clear indication that the pandemic has not made any negative impact on the development of the company. The core merchant services and digital payments business was set at a little over a third of revenues, and rose 13% to reach 26 trillion RMB. while InvestmentTech surged 55%, CreditTech saw a rise of 60%.
Considering the recent trends, Ant said that beyond June, Alipay digital payment app MAUs received an increase in its revenue from 711 million till June 30 to 731 million till September 30, which is a profit of 2.8%. Additionally, the consolidated revenues through the nine-month period ending in September were shot up 43% to 118 trillion RMB recently.
Highlighting on the question of where the money is flowing, Ma’s Ant Group declared that it would use nearly 10% of the proceeds it got from the Hong Kong listing and would focus on digitizing the service industry, which is the company’s vision. Further, it will allocate 40% to expand and develop all its cross-border efforts.
The good news is about 60% of customers feel that digital options like the new forms of POS and alternative credit options, such as BNPL (‘buy now, pay later’), has greater influence on the how and where they shop. Touchless payments and well-developed eCommerce checkout systems are gaining popularity in this COVID-19 crisis, a period when cash payments are avoided to prevent the transmission of the deadly virus.