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A Chinese fintech could be bigger than Goldman Sachs and Wells Fargo put together

Ant Group
Reuters/Bobby Yip
A monster IPO.
Published

The world’s most valuable fintech could turn out to be one of the most valuable financial companies in the world.

Ant Group, the upstart that was spun out of Chinese e-commerce giant Alibaba, said today (July 20) that it will list on the Hong Kong Stock Exchange and on China’s Science and Technology Innovation Board, dubbed the STAR market and seen as the country’s answer to the Nasdaq. The company did not reveal the timeframe or the size of the listings, but said the IPOs would accelerate its plans for digitizing the service industry in China and driving domestic demand, while also helping its international efforts.

The operator of Alipay, the ubiquitous digital wallet and financial “super app,” won a monster $150 billion valuation after a funding round in 2018. Its IPO could reportedly lift the valuation to $200 billion, putting it on par with Bank of America, and worth as much as Wells Fargo and Goldman Sachs put together. That would make the six-year-old company one of the most valuable financial services firms in the world, trailing only the likes of JPMorgan Chase and Visa.

Ant has been buffeted by the US-China trade war and increased Chinese government scrutiny over the size of its mammoth money-market fund and sprawling financial operations. (The company has played up its tech credentials, likely to avoid the baggage that comes with being seen as systemically important.) Even so, some analysts are suggesting bullish valuations of $210 billion or more, based on their estimates for the company’s 2021 earnings and its ecosystem ties to Alibaba.

Alibaba’s IPOs underscore how things have changed since it listed on the New York Stock Exchange six years ago. Chinese tech champions had routinely flocked to the US to list shares, but now these companies, facing threats and greater scrutiny from US officials, have been rushing back to China or Hong Kong. US-listed e-commerce giant JD.com, a rival of Alibaba, as well as gaming company Netease are among the Chinese companies that launched secondary listings in Hong Kong this year.

Ant’s IPO could also seen as a boost for capital markets in mainland China and Hong Kong, as the sweeping national security law implemented by Beijing in the former British colony raises questions about the city’s status as an international financial hub. Ant is 33% owned by Alibaba and is controlled by Alibaba founder Jack Ma.

One of the biggest winners of the IPOs could be the STAR market, which may become the world’s largest exchange by funds raised after the offering. The Chinese board has raised  $14.1 billion in proceeds from initial and secondary listings as of July 10 this year, making it the second-largest exchange worldwide following Nasdaq, which raised $18 billion during the period. Some $13.8 billion was raised in Hong Kong, according to Refinitiv data.

“The news is positive to the market, which helps unlock the value of Ant Group, a techfin company with three pillars in digital payment and finance, globalization and technology services,” Thomas Chong, an equity analyst at Jefferies, wrote in a note. “There are a lot of areas that Ant can integrate with Alibaba and cater to the needs of the whole consumer life cycle.”

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