- Ant Group, a fintech company affiliated with Chinese retail giant Alibaba, is preparing to go public with an expected valuation of $ 200 billion.
- The company was established in 2014 to operate Alipay, a ubiquitous digital payment service used by millions of Chinese shoppers.
- Here’s what we know about Ant Group, whose IPO could catapult fintech beyond the world’s most established financial institutions, like Goldman Sachs.
- Visit the Business Insider homepage for more stories.
Although nearly a billion people in China use Ant Group’s mobile payment services, many people have probably never heard of Jack Ma’s Alibaba tech affiliate.
With an estimated valuation of around $ 200 billion, Ant Group is the world’s most successful fintech company and is preparing for an initial public offering in China – which could be one of the largest IPOs in history.
Here’s what we know about the Chinese fintech juggernaut, which is targeting PayPal as a leader in the digital payment market and is set to overtake the world’s most famous banks with its IPO.
Ant Group is an affiliate of Alibaba, the nation’s largest retail giant
Some have called Alibaba the “Amazon of China” and, although Alibaba and Amazon are both engines of e-commerce in their respective home countries – and compete in international markets – there are differences between both.
Alibaba is the parent of 14 main units, including its main retail site Alibaba.com and Ant Group
Ant’s origins begin with Alipay, which is now one of China’s most popular and ubiquitous digital payment services, much like PayPal in the United States. Alipay was founded in 2004 to specifically serve as a payment service for customers who visit Alibaba’s online marketplaces.
Alipay split from Alibaba in 2011 and has since acted as an independent mobile payment service, expanding not only to a larger part of the Chinese public, but also internationally, such as in Vienna. A holding company called Ant was formed in 2014 to serve not only as Alipay’s parent company, but also other financial services, such as lending and wealth management.
Ant CEO Eric Jing told Think Business in 2017 that the company named itself after the little bug because it serves “the little guys.”
In 2018, Alibaba bought back a 33% stake in Ant, according to the Nikkei Asian Review.
Alibaba: The Chinese holding company founded by Jack Ma in 1999 whose retail sites dominate the country’s retail sector.
Group of ants: An Alibaba affiliate established in 2014 to serve as a parent company for Alipay, as well as other financial services. Jack Ma, founder of Alibaba, owns a majority stake in Ant Group.
Alipay: A digital payment service was launched in 2004 and has skyrocketed from Alibaba’s secure payment processor to a de facto payment app for the Chinese general public.
Jack Ma: Founder of Alibaba and one of the richest people in China, with a net worth of nearly $ 50 billion.
Don’t call Ant Group a finance company
Ant recently attempted to shift the business lens from the financial company to the technology service provider. The company wasn’t even called Ant Group until June – previously it was Ant Financial Services.
That’s because the company has turned to the business of some Chinese banks, siphoning off millions of customers and landing in regulatory hot water. It specifically housed a money market fund, a type of low-risk mutual fund, which has grown to be the largest of its kind in the world – over 600 million people are invested in it, or one-third of the total population of the country. China, as reported by the WSJ. . The mutual fund has reportedly been dubbed “a blood-sucking vampire” for the bite it took from the Chinese financial system.
And if Ant’s IPO goes as some analysts predict, other established financial institutions – like Wells Fargo and Goldman Sachs – could be left in the dust. Ant is aiming for a market valuation of over $ 200 billion. For comparison, Goldman Sachs has a market cap of $ 73 billion.
Ant’s IPO could be one of the biggest initial public offerings in history
Ant’s last notable fundraiser was in 2018, according to CNBC, when the company raised $ 14 billion from investors to bolster its global Alipay service. This inflated its valuation to $ 150 billion. The company said on Monday that it was preparing to go public.
“It’s like having Apple on the Nasdaq,” Primavera Capital Group founder Fred Hu, whose private equity firm quickly backed Ant, told The Wall Street Journal.
Startup bypassed New York Stock Exchange listing as US-China relations become continually strained
Ant opted for dual listing in Hong Kong and Shanghai, glossing over the NYSE, although a source told the WSJ the company still intends to only list in China.
But the move still comes as Chinese tech companies find themselves in the crosshairs of strained relations between the eastern nation and the United States. Lawmakers are increasingly concerned that the Chinese government has access to user data through Chinese technology platforms.
The United States is considering banning the ultra-popular video-sharing app TikTok, owned by Chinese tech giant ByteDance. The House of Representatives has voted to ban the app from all federally issued devices, and some US investors in Bytedance are considering buying a controlling stake in TikTok to move the platform away from its ties to China. In the UK, the government has banned 5G networking equipment from Chinese telecommunications giant Huawei, and the US is similarly trying to distance itself from the company.
PayPal vs. Ant Group
PayPal Holdings operates in more than 200 markets around the world and swallowed nearly 14.5% of the fintech market in 2019, according to a June report from The Business Research. Ant Group held 8% of the total share that year and now operates in more than 50 markets. Other competitors, like Tencent, Square, and Shopify, were lagging behind.
PayPal went public in 2002 and now has a market cap of $ 205 billion in the United States. And while it may be the leading mobile payment service in the United States, when PayPal entered the Chinese market in 2019, it ended up with a small fish in a large pond, as Fortune reports. . Ant, along with Tencent’s WeChat, dominated 90% of the market at the time. Alipay officially entered the U.S. market in 2017, initially to allow Chinese customers in the country to shop without worrying about currency exchange, as The Verge reports.
As the two companies continue to grow, the strained US-China ties, led by the Trump administration, will likely continue to hamper Ant’s entry into the US market, according to a Quartz report. . In 2018, the United States rejected Ant’s attempt to acquire MoneyGram, a money transfer company, on national security grounds.