Ant Group, the payment- and finance-focused sister firm of the Chinese e-commerce titan Alibaba, filed paperwork on Tuesday to checklist shares in Hong Kong and Shanghai, the first steps towards what may very well be a blockbuster preliminary public providing.
Online finance has exploded in China lately, and Ant’s flagship service, Alipay, has been a key driver. Relatively few folks in China had bank cards when e-retail and different web providers started taking off in the nation. That has helped app-based funds turn out to be much more ubiquitous in China than they’re in the West.
In China, $67 trillion in transactions have been carried out on cellular gadgets in 2018, in accordance to estimates by the analysis agency Bernstein. Many of these occurred by Alipay and WeChat, a rival digital pockets and messaging app owned by one other Chinese web big, Tencent.
Once folks have been utilizing Alipay to stash their money and pay for on-line purchases, Ant might start providing them other forms of providers by the app, together with private loans and insurance coverage insurance policies. Alipay says it has 900 million customers in China.
“That super-app approach — where you create an ecosystem that’s enabled by payments, and then you layer on the other products and services both financial and nonfinancial — is something that no other company around the world has successfully done,” mentioned Zennon Kapron, the director of Kapronasia, a analysis agency centered on the monetary expertise trade.
Ant’s share sale is probably going to be large. The firm raised funding two years in the past at a valuation of $150 billion, which made it certainly one of the most richly valued personal companies in the world.
The firm’s filings on Tuesday didn’t point out how a lot it hoped to increase by the share gross sales. Investors did, nevertheless, get their first detailed have a look at key firm financials.
Ant mentioned it generated $17 billion in income final yr, a bounce of greater than 40 p.c from 2018. More than half of its 2019 income got here from monetary providers resembling lending, wealth administration and insurance coverage that have been provided by Alipay. The charges it earned from processing funds and serving retailers accounted for nearly all of the relaxation.
The firm mentioned that transactions price $16 trillion occurred on Alipay final yr, a one-fifth improve from the yr earlier than. It additionally famous that the platform had enabled $290 billion in credit score to people and small companies, in addition to $500 billion in investments.
Unlike another fast-growing tech firms which have listed shares lately, Ant will not be dropping cash. It mentioned its revenue final yr was round $2.5 billion.
Ant’s offering signals confidence in Hong Kong’s status as a financial hub at a time of upheaval. The central authorities in Beijing have used a new national security law to clamp down on antigovernment protests in Hong Kong, a Chinese territory, and in the process have cast doubt on its status as freethinking and laissez-faire. The city has also been strained by waves of coronavirus infections.
Ant’s choice of Chinese exchanges over American ones is meant to capitalize on the interest of local investors, for whom Alipay is a household name. Alibaba held a giant share sale in New York in 2014 and a second listing in Hong Kong last year.
But it also reflects the uneasy state of affairs for Chinese technology companies in the United States. President Trump has vowed to restrict apps including WeChat and TikTok in the name of safeguarding Americans from data gathering by the Chinese Communist Party.
Last week, Alibaba’s chief executive, Daniel Zhang, referred to the situation between Chinese companies and the Trump administration as “fluid.”
“We are closely monitoring the latest shift in U.S. government policies,” Mr. Zhang said during a conference call with analysts.
Alibaba created Alipay in 2004 as a tool for building trust between buyers and sellers on its online bazaars. At the time, internet retail was nascent in China. By holding payments in escrow, Alipay helped assure customers that they would not lose money if merchants turned out to be scammers.
Over time, Alipay evolved into an all-purpose payment tool, and Alibaba spun it out as a separate entity, which was rebranded as Ant Financial in 2014. The two companies had a profit-sharing deal until Alibaba acquired a one-third stake in Ant last year.
Recently, the company has begun dropping the “financial” from its English name, saying it wants to emphasize its technology.
Ant has sought to broaden its global reach by teaming up with payment companies in India, Southeast Asia and Britain. But its ambitions in one giant market have been thwarted by politics. In 2018, it broke off talks to buy the American money transfer company MoneyGram after the deal failed to win the blessing of a Washington committee that scrutinizes investment transactions for national security risks.