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Strong Demand Forces Ant Group To Pre-Close Institutional Book Of Its Hong Kong IPO

Strong Demand Forces Ant Group To Pre-Close Institutional Book Of Its Hong Kong IPO
Strong demand is prompting China’s Ant Group to prematurely close institutional order books for the Hong Kong part of its record breaking dual IPO, said reports quoting sources with knowledge of the matter. 
The company has decided to close the institutional book of the $17.2 billion Hong Kong listing a day ahead of its scheduled closure on Thursday, said sources.
Within just one hour after its launch on Monday, the book was oversubscribed which reflected the very high interest among investors surrounding the initial public offering (IPO) of the Chinese fintech giant. This frenzy for investment has also created heavy demand for cash and rates at the money markets in Hong Kong have soared to five-month highs.
No comment on the issue was available from Ant Group.
The company is aiming to raise $34.4 billion from its IPO launch in Hong Kong and Shanghai with the offer split between the stock exchanges of the two cities which provides the company a total valuation of about $312 billion.
An affiliate of e-commerce giant Alibaba Group Holding, Ant operates China’s biggest mobile payments platform Alipay.
Hong Kong operates a ‘clawback’ system where heavy oversubscription from small investors can result in them getting a greater share.
If the initial retail allocation is more than 20 times oversubscribed, the total amount will be increased to 167.1 million shares, or 10% of the deal, shoed the prospectus for the IPO.
In order to lend to customers to buy the stock, billions of dollars of margin financing are being readied by the city’s brokers.
According to Ant’s prospectus, retail investors need to finalise and pay for the shares they have bid for by Friday. The cash thus raised will then be locked up until allocations are announced on November 4.  According to broker, this could hold up more than HK$1 trillion ($129.03 billion) in retail funds.
“The demand is overwhelming ... It will smash all previous records,” Francis Lun, Hong Kong-based chief executive of GEO Securities, said about retail demand for Ant.
With an increase in demand for cash to buy Ant shares there was a push up in Hong Kong dollar rates and as a result Hong Kong’s money markets tightened on Tuesday.
“Given the size of the IPO...every man and their dog will be trying to get in, and that means a lot of money is going to be locked up which causes a tightening and squeezes the HIBOR up,” said Khoon Goh, head of Asia research at ANZ Bank in Singapore.
“But once it’s over, and whoever is lucky gets their hands on it, the rest of them will have their money returned...the HIBOR will drop.”

Christopher J. Mitchell

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