The Chinese financial technology firm Ant Group Co Ltd is set to go public next week in the largest IPO to date. Since investors from the retail and institutional sectors are vying for shares, the IPO is largely oversubscribed.
About the Ant Group IPO
Ant Group, founded by billionaire Jack Ma, is China’s largest payments processor. Its mobile payment service provider, Alipay, boasts over 730 million monthly users. In comparison, PayPal has 346 million active users. In the first half of 2020, the company processed $17 trillion in digital payments, according to The New York Times.
Reuters reported on Oct. 29 that the Shanghai tranche of the IPO drew about 19 trillion yuan or $2.8 trillion in retail investor bids. The Hong Kong portion brought bids of 1.3 trillion Hong Kong dollars or $168 billion.
The Wall Street Journal said that the equal-split IPO will be worth $34.4 billion or potentially $39.5 billion if both cities’ underwriters take the increase of 15 percent. The barrier to entry is high in STAR markets. Individuals must have a minimum of two years of stock-trading experience and at least 500,000 yuan in brokerage account assets or $74,300.
What is an oversubscribed IPO?
When the demand for new securities, like a new IPO, exceeds the number of available shares, the IPO is oversubscribed. Oversubscription indicates a high interest in the stock. It can lead to a higher IPO price and more shares offered for sale.
Ant Group exercised what is called a greenshoe option or an overallotment of shares, which allows underwriters to sell an additional 15 percent more of the shares. Now, Ant will sell 1.92 billion shares on its STAR market when the company goes public, according to Reuters.
Loans totaling more than 470 billion Hong Kong dollars or $60.6 billion have been given to prospective retail buyers by 12 major Hong Kong banks, according to a report from The Wall Street Journal.
The Wall Street Journal also noted that IPO investing has become more popular in Hong Kong. “Low interest rates have made potential quick profits from flipping IPO stocks even more appealing—and made it cheaper to use borrowed funds for investing.”
Ant Group's IPO stock price
Ant Group's stock price comes with a low minimum purchase, according to Edmond Hui, the chief executive of Hong Kong brokerage Bright Smart Securities. “Investors can get in for the price of 50 shares—US$516, given an IPO price of about $10.32 a share,” according to The Wall Street Journal.
How to buy into the Ant Group IPO
Interested U.S. investors aren't able to purchase Ant Group shares directly since the company isn't going to be listed on the NYSE or Nasdaq. However, U.S. investors can purchase ETFs that invest in international IPOs.
ETFs that may include Ant Group in their portfolios are the Renaissance International IPO ETF, the iShares MSCI Hong Kong ETF, the iShares MSCI China ETF, and the Invesco China Technology ETF.