Ant Group, which operates the online payment platform for the world’s largest e-commerce company, is kicking off the process for simultaneous stock offerings in Shanghai and Hong Kong, extending a series of mega tech listings amid the fallout in US-China trade relations.

While the provider of the Alipay service is still discussing the size and timing of the share sale, the outcome is likely to be one of the largest initial public offerings in years. Stock analysts are valuing Ant at more than US$200 billion, higher than state-owned China Construction Bank and just shy of Bank of America’s market capitalisation.

Ant Group, previously known as Ant Financial, is an affiliate of Alibaba Group Holding, the owner of the South China Morning Post.

Alibaba received a 33 per cent equity interest in Ant Financial in September last year under a restructuring that also ended a profit-sharing arrangement between them, according to its prospectus in November. While Alibaba does not control Ant Group, its co-founder and China’s richest man Jack Ma effectively controls about 50 per cent of the voting interest in Ant Group, according to its annual report.

Ant Group’s listing destinations are notable for excluding New York. Escalating US-China tension over trade, technology and finance has soured sentiment on New York listings broadly among Chinese entrepreneurs.

In order to compete more effectively with New York, Hong Kong made listing on its stock exchange more attractive to tech giants by embracing companies with weighted voting rights in 2018. Chinese regulators, on the other hand, launched Shanghai’s Nasdaq-style Star Market last year with more market-driven pricing than its other domestic exchanges.

“The innovative measures implemented by the Shanghai Star Market and the stock exchange of Hong Kong have opened the door for global investors to access leading-edge technology companies from the most dynamic economies in the world, and for those companies to have access to the capital markets,” Ant’s executive chairman Eric Jing said in a press release on Monday.

Tapping both onshore and offshore markets will allow Hangzhou-based Ant to deepen the pool of potential investors. Both the Hong Kong and Shanghai stock exchanges welcomed Ant’s decision.

“We are delighted that Ant Group has today confirmed that they will be seeking a listing on HKEX,” chief executive Charles Li said. “Their intention to IPO in Hong Kong, as well as in their home market, affirms Hong Kong’s role as the world’s leading international IPO market.”

A concurrent listing on the two exchanges will help Ant fund its goal of digitising the service industry in China and driving domestic demand, as well as position the company to develop global markets with partners and expand investment in technology and innovation, it said.

Typically, once a company starts testing the market for an IPO, then the process would take six to nine months.

“We always believe that “small is beautiful, small is powerful,” Jing wrote in a letter to employees. “This is also where our name “Ant” originated. With every tiny effort, we hope to continuously bring even more small yet beautiful changes to the world.”

Ant’s Series C round of fundraising in June 2018 priced the company at roughly US$150 billion, but valuations by Wall Street analysts have climbed since then, in lockstep with its contribution to Alibaba’s earnings.

Bank of America stock analysts estimated Ant’s valuation at US$210 billion based on about 45 times its 2021 earnings estimates. Elsewhere, JP Morgan valued Ant at US$218 billion on 25 times the bank’s estimated 2023 earnings and its sum-of-the-parts model for Alibaba includes $26 a share for its stake in Ant.

However, simply adding up the value of each part of Ant fails to capture the worth created by being part of Alibaba’s ecosystem.
Most stock analysts agree that Alipay’s closest peer and arch-rival is the financial arm of Tencent’s flagship social media platform WeChat which has a similar profile in terms of size and growth.

Alipay and WeChat Pay enjoy a duopoly in China’s US$8.3 trillion mobile payments market. The two players had an aggregate market share of about 90 per cent of third-party mobile payments in China at the end of last year.

For payments, investors might look to Palo Alto-headquartered PayPal, while for financial networks, the world’s two largest credit card businesses are also useful yardsticks, Visa and Master Card.

However, Ant is also hard to value for the variety of businesses it runs. Digital financial services contributed more than half of Ant’s overall revenues for the twelve months ended March 31, comprising wealth management, micro-financing and insurance.
The company aims to grow its services fee to 80 per cent of total revenues within five years, that is business-to-business, selling the technology it has developed to merchants and other financial service firms. The contribution from Ant’s own services direct to consumers would shrink as a result.

In March, Alipay said it would diversify further from a platform that provides just financial services into an open lifestyle ecosystem. The CEO of Ant, Simon Hu released a three-year plan to open up Alipay as an online platform, working with 50,000 independent software vendors to digitally upgrade 40 million merchants.