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US Restrictions Not Likely To Affect Ant Group's $35 Billion IPO: Analysts

US Restrictions Not Likely To Affect Ant Group's $35 Billion IPO: Analysts
According to potential investors and analysts, the restrictions imposed by United States on the Chinese financial technology giant Ant Group will not likely be affect its $35 billion initial public offering (IPO) because of the very limited overseas presence of the company.
Based on concerns that their payment platforms threaten national security, US President Donald Trump has been reported to be considering imposing restrictions on Ant, an affiliate of Chinese e-commerce firm Alibaba, and Tencent.
If the curbs are eventually actually implemented by the Trump administration, it would highlight the manner in which Chinese companies are being attempted to be stopped from embedding themselves in the financial system of the US before such companies can become a real threat to competition.
It did not have any information about discussions within the Trump administration about restrictions, Ant said. There were no comments on the issue available from Tencent and the White House.
According to reports, a dual-listing in Shanghai and Hong Kong is being planned by Ant which could be launched as early as this month and the total value of the IPO could make it the largest IPO of the world ever – larger than the $29.4 billion IPO floated by Saudi Arabia’s oil giant Saudi Aramco in December last year.
Mainly, Chinese citizens with accounts in renminbi extensively use Ant's Alipay and Tencent's WeChat payment platforms. Most of the businesses transactions that they have in et United States is related to American merchants accepting payments from Chinese travelers and businesses in the country.
"Basically the overseas revenue accounts for maybe 5% or less for Ant Group. That means for the U.S. revenue contribution it would be even less than that," said Morningstar senior equity analyst Chelsey Tam.
"I'm sure investors will ask about it during the roadshow but it's quite easy for investors to understand that if Alipay and Wechat Pay go overseas the U.S. is probably not the top priority," Tam said.
Based on preliminary investor interest in its IPO and based on its calculations of its potential valuation of about $250 billion or more, Ant is aiming to raise as much as $35 billion in form the proposed dual IPO, claimed reports. The company makes about 95 per cent of its revenue in China.
There was not much worry about the planned US restrictions on Ant because the US market accounts for only a small fraction of the overall business of the company, an official at a state-backed Chinese fund, a potential investor in an Ant IPO, who was not named was quoted in a report as saying.
"The ban is more about stopping Ant from expanding in the U.S. in the future, but that shouldn't have an immediate impact on the valuation as there is lot more growth left for Ant in China," said LightStream Research analyst Supun Walpola, who publishes on the Smartkarma platform.

Christopher J. Mitchell

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