Ant Group IPO: 3 key investment themes ahead of listing

• Ant Group is aiming to raise US$30 billion through dual listing
• This will be the largest IPO ever, surpassing Saudi Aramco's launch last December
• Shares of Alibaba – Ant’s parent company – soared past US$300 this week

1. Alibaba stock broke through US$300 this week

Alibaba Group’s Hong Kong shares posted a new record price this week, ten months after launch.

The Chinese e-commerce titan’s stocks hit HK$292 (US$37) a share on Thursday 03 September 2020.

This follows its US listing’s performance a day earlier, when share price broke through a key resistance level to hit a new all-time high of US$301.

Ever since Alibaba Group’s fintech offshoot Ant Group announced its plans to list on the Shanghai and Hong Kong stock exchanges, the e-commerce giant’s share price has soared to record highs.

In the last two weeks alone, Alibaba’s US and Hong Kong share prices have rallied around 15% respectively.

Better-than-expected quarterly earnings have also helped to boost Alibaba’s market cap by some 20% in the month of August alone.

If Alibaba’s current stock rally is any indication of things to come, Ant Group’s upcoming IPO looks set for a big debut.

2. Ant Group gunning for the world’s largest IPO crown

Ant Group is reportedly targeting a share sale of roughly US$30 billion – which would make it the largest IPO in history, overtaking Saudi Aramco’s US$25.6 billion offering last December.

Analysts have also put the flotation’s estimated market valuation at about US$225 billion.

The company stated that it plans to sell at least 10% of its enlarged share capital in the dual listing. If exercised, an over-allotment option (at 15% of total equity), called a ‘greenshoe’, could also lift the total capital raised to around US$33.5 billion.

Ant Group is also planning to raise more funds on Shanghai’s STAR Market than on the Hong Kong Stock Exchange, people close to the matter said.

While Ant did not furnish any specific details on the simultaneous listing, the sources said the IPO’s team leads have approached many Chinese institutional investors to invest in the STAR lots.

The IPO managers are hoping that these parties would come on board as strategic investors, by committing at least 1 billion yuan to 1.5 billion yuan each for a minimum lock-in period of 12 months.

Ant has also set a placeholder amount of 48 billion yuan (US$7 billion) for the Chinese tranche as a pre-sale indication of the Shanghai float size.

3. Ant Group posted a 1000% profit growth

It is worth noting for potential investors that the payments company reported a profit of 21.9 billion Chinese yuan (US$3.2 billion) on total revenues of 72.5 billion yuan (US$10.6 billion) for the first half of 2020.

This represents a more than 1000% year-on-year growth in profit. In the first half of 2019, Ant brought in 1.9 billion yuan (US$278 million) in profit, alongside a revenue of 52.5 billion yuan (US$7.7 billion).

According to an official exchange filing submitted last Tuesday (25 August 2020), the group’s flagship product – Alipay, a mobile payments app – has achieved over one billion annual active users as of 30 June 2020.

Alipay has also processed 118 trillion yuan (US$17.3 billion) worth of domestic transactions for the 12 months up to 30 June 2020.

The platform also has a growing international footprint, experiencing an annual transaction volume of 622 billion in markets outside of China during the same period.

Another detail worth pointing out is that Ant is not as dependent on Alipay’s sales as before. Two years ago, Alipay contributed 50% of Ant’s total revenue. This fell to 36% in the first half of 2020.

How to trade Ant Group’s IPO with IG

After the listing

With IG, you can get exposure to Ant Group shares in the same way as you would with any other shares listed on the stock market. You can speculate on share price movements using CFDs.