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Jack Ma’s Ant Group IPO Plan Leaves Some Unanswered Questions

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The Ant Group IPO plan is now official. The financial services and technology group plans to list its stock in Hong Kong and Shanghai exchanges. The Ant Group IPO plan will be a departure from the path that its parent, Alibaba Group Holding, took six years ago.

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Ant Group, also known as 'Ant Financial,' was one of Alibaba’s units. However, the company separated from the parent in 2014. The split was shortly before Alibaba’s IPO in New York. Chinese billionaire Jack Ma co-founded Alibaba and controls Ant Group.

Not everything is clear about the Ant Group IPO plan

Ant Group has cleared doubts about whether it plans to go public. The company clarified that it will choose China over the U.S. for its IPO. However, there are still some questions about the Ant Group IPO plan.

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For example, Ant has not disclosed details about when the IPO will take place. While the market expects the Ant Group IPO to take place this year, no one knows if it will be later this month or at the end of the year.

The fundraising target is another missing detail in the Ant Group’s IPO plan. The company has not disclosed how many shares it will sell and at what price. Ant is estimated to command a valuation of $200 billion. Therefore, selling 15 percent of Ant shares in the IPO could raise $30 billion.

Alibaba owns a 33 percent stake in Ant Group. At a $200 billion valuation, the stake is worth $16.5 billion. Previously, Alibaba had a profit-sharing arrangement with Ant Group. The company decided to swap the profit-sharing arrangement for an equity stake to have a share in the long-term success of the business. Jack Ma, who controls Ant Group, owns a 4.8 percent equity stake in Alibaba. Ma stepped down as Alibaba’s executive chairman last September to focus on charity work.

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U.S.-China tensions and race to move closer to home

Ant Group picking Hong Kong and Shanghai instead of New York for its IPO comes amid rising U.S.-China tensions. China angered the U.S. and its allies after it imposed a national security law on Hong Kong last month. As a result, the Trump administration has lined up sanctions that target Chinese officials over the controversial Hong Kong security law. The U.K. has also suspended its extradition deal with Hong Kong due to the security law.

However, US-China tensions started long before the Hong Kong security law. The Trump administration has been leading a campaign to block China’s Huawei from the Western 5G market. Australia and the U.K. have taken steps to block Huawei from their 5G markets.

Amid the U.S.-China tensions, Chinese companies face the risk of delisting from U.S. exchanges due to accounting issues. The Ant Group IPO plan in Hong Kong and Shanghai comes as Chinese companies move closer to home. Recently, U.S.-listed Chinese companies JD.com and NetEase moved to list their stocks in Hong Kong as well. Alibaba led JD.com and NetEase to the Hong Kong listing with a transaction last year that raised $13 billion.

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