Ant Group Trades at 50% Premium in Hong Kong Gray Market
The Ant Group logo and the Alibaba Group logo are displayed behind a reception desk in Hangzhou, China. (Photographer: Qilai Shen/Bloomberg)

Ant Group Trades at 50% Premium in Hong Kong Gray Market

A rare move by China’s top regulators to rein in Ant Group Co.’s expansion plans hasn’t curbed interest in the fintech stock, which continues to trade at a 50% premium ahead of its debut this week.

Institutional investors bought shares at about HK$120 ($15.50) apiece in gray-market trading for a second day Tuesday, compared with the listing price of HK$80, according to people familiar with the transactions. They declined to be identified discussing private matters.

The preliminary trading suggests investors aren’t put off by a warning from China’s regulators that Jack Ma’s firm faces increased scrutiny and will be subject to the same restrictions on capital and leverage as banks. Ma, Ant’s billionaire co-founder, was summoned to a rare joint meeting on Monday with the country’s central bank and three other top financial regulators.

Anticipated Debut

Ant’s initial public offering is the most anticipated in years, attracting at least $3 trillion in orders for its dual listing in Hong Kong and Shanghai ahead of its trading debut on Nov. 5. The stampede for shares is fueling predictions of a first-day pop, even as skeptics warn of risks including the U.S. elections, tightening regulations in China and rising Covid-19 infections worldwide.

“It’s pretty extraordinary given the backdrop and it shows you how much Asia is decoupling from the United States,” said Gary Dugan, chief executive officer of the Global CIO Office in Singapore, which didn’t take part in the IPO.

In a so-called gray market, investors can bid for new shares before they officially start trading on a stock exchange. The over-the-counter mechanism is often seen as an early indicator of investor demand for an IPO. Individual buyers will be able to trade through a similar channel on Wednesday in Hong Kong.

Ant Group Trades at 50% Premium in Hong Kong Gray Market

The fintech company’s $34.5 billion IPO gives it a market value of about $315 billion based on filings, bigger than JPMorgan Chase & Co. and four times larger than Goldman Sachs Group Inc. The sale vaults Ma’s fortune to $71.6 billion, topping the Walmart Inc. heirs.

The IPO surpasses Saudi Aramco’s record $29 billion sale last year, and the $25 billion raised by Ma’s Alibaba Group Holding Ltd. in 2014. Ant priced its Shanghai stock at 68.8 yuan ($10.27) apiece. The company may raise another $5.17 billion if it exercises the option to sell additional shares to meet demand, known as the greenshoe.

The IPO is attracting interest from some of the world’s biggest money managers, and sparking a frenzy among individual investors in China clamoring for a piece of the sale. In the preliminary price consultation of its Shanghai IPO, institutional investors subscribed for over 76 billion shares, more than 284 times the initial offering tranche, according to Ant’s Shanghai offering.

“The market’s infatuation with growth stocks is very strong at the moment,” said Arnout van Rijn, chief investment officer for Asia-Pacific at Robeco. With many investors betting China’s domestic economy will be sheltered from the trade war with the U.S., “it’s not surprising that there’s more demand than supply for a stock like this.”

Elderly Club

Ant has faced censure in Chinese state media in recent days after Ma criticized local and global regulators for stifling innovation and not paying sufficient heed to development and opportunities for the young. At a Shanghai conference late last month, he compared the Basel Accords, which set out capital requirements for banks, to a club for the elderly.

“Good innovation is not afraid of regulation, but is afraid of outdated regulation,” Ma said. “We shouldn’t use the way to manage a train station to regulate an airport, neither should we regulate the future with the method from yesterday.”

Opinion pieces in official newspapers -- including those run by the central bank and banking watchdog -- have faulted Ant for straying from its core payments business and called out big tech for misleading users to consume beyond their means.

Ant said in a statement late Monday it will “implement the meeting opinions in depth” and follow guidelines including stable innovation, an embrace of supervision and service to the real economy.

Ant was formed when Alibaba launched the Alipay payments app in 2004 as an escrow service for buyers and sellers on Ma’s e-commerce website. In 2013, users were given the ability to save money and earn interest on the balances stored on their accounts. The firm then started offering credit to small businesses, branching out from its consumer-finance focus.

©2020 Bloomberg L.P.

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