Last week, Ant Group, parent company of China’s largest online payment platform Alipay, announced that it sought to be co-listed in The Stock Exchange of Hong Kong and the Nasdaq-like STAR market in Shanghai Stock Exchange. If approved, the dual listing could become the world’s largest IPO in years, marking a milestone for China’s fintech industry and Ant’s parent company Alibaba Group.
The decision came nine months after Alibaba acquired a third of Ant Group’s shares, a move that stirred speculations about Ant’s IPO attempt. The fintech giant could be valued at as high as $200 billion after the dual listing, according to a Reuters report earlier this month. It was already crowned as the world’s most valuable fintech and unicorn company with a valuation of $150 billion in a 2018 financing round.
Here are three facts you need to know about the fintech giant.
What is Ant Group’s founding story?
The founding of Ant Group dates back to 2004 when Alibaba launched Alipay, an online payment platform, as an intermediator between shoppers and sellers of Alibaba’s online shopping platform Taobao. As Taobao rose to be the largest e-commerce player in China, Alipay became the most popular digital wallet that reshaped Chinese consumers’ spending habits, dominating more than half of China’s online payment market by 2019.
In March 2013, Alibaba incorporated Alipay into its newly founded Small and Micro Financial Services Company, which aims to “bring inclusive finance to the world” through a variety of financial platforms. In October 2014, Small and Micro Financial Services was renamed Ant Financial Services Group and started featuring a blue ant mascot that embodies the vast but “small and micro” communities. Targeting small business owners and the working class, Ant Group hopes to “serve 2 billion global consumers, empower 10 million profitable businesses and create 100 million jobs” by 2036, according to the company’s website.
Is Ant Group a tech company or financial institution?
“If the banks don’t change, we will change the banks.”
Such was the declaration that Alibaba’s founder Jack Ma made at an entrepreneur conference in 2008. With its crown jewel Alipay and other financial subsidiaries, Ant Group has overturned not only the banking industry, but many other financial sectors in China as it acquired a wide range of licenses from Chinese regulators, including a credit rating license for Zhima Credit, an online banking license for MYbank, and a microlending license for Huabei, to name a few. The company owns so many financial permits – more than any other financial institution in China as it provides services beyond banking, insurances, and securities – that it draws criticism for calling itself a tech company instead of a financing vehicle.
Despite the voices of skepticism from investors and regulators, Ant Group seems determined to cultivate a narrative that affirms its status as a tech firm in recent years. In an interview with China Entrepreneur Magazine in July 2019, Ant’s Vice CEO Huang Hao said that “Ant Group has never wanted to be a financial institution. It has always been a tech company.” Shortly before the company announced its dual-listing plan, it was even renamed Ant Technology Group, a move that some analysts point out might boost its IPO share price as tech firms generally gain more market premiums than financial institutions.
What is Ant Group’s relationship with Alibaba?
While Ant Group has functioned as a strategically important part of Alibaba, several disputes involving the tech behemoth and its fintech subsidiary reveal a complex equity ownership structure between the two.
From 2009 to 2010, Jack Ma transferred Ant Group’s predecessor Alipay from Alibaba Group to his personal company, Zhejiang Alibaba E-Commerce Co., so that Alipay could obtain a third-party payment license from Chinese regulators. Yahoo! Inc. and Softbank, major institutional investors of Alibaba Group at the time, declared that they were unaware of this decision. The incident finally evolved into the notorious Alipay Equity Dispute that was settled in 2011 by a mutual contract among the three major stakeholders, which promised backers of Alibaba Group a significant amount of Alipay’s future equity returns.
In September, Alibaba Group bought a third of Ant Group’s equity interest through a restructuring and became one of the major beneficiaries of the incoming dual listing. Thanks to the 2011 contract, Jack Ma still holds absolute executive power of Ant Group, although he pledged to reduce his stake in the company to less than 8.8% in a 2019 filing to The Stock Exchange of Hong Kong.