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Could Ant Group’s second attempt at listing match the hype?

Another huge China tech IPO could be coming sooner than later. Ant Group has reached a deal with Chinese regulators following the antitrust issues that scuppered its planned IPO last year.

According to a report by Reuters, the fintech giant will become a financial holding company, which will include its payment processing and technology businesses.

A possible IPO comes after a period of political turbulence for the Chinese tech sector. In November, Ant Group founder Jack Ma blasted regulators, which prompted apparent backlash from the authorities. Not only was Ant Group’s original $35bn IPO pulled in November, but regulators have launched an antitrust probe into the increasing power of China’s tech companies.

Along with Ma’s former company Alibaba [BABA], Ant Group has faced plenty of scrutiny. Last month The People's Bank of China proposed plans to clamp down on China's mobile payments market — bad news for Ant Group, which operates an effective duopoly on the market with rival Tencent [TCEHY].

 

Why is Ant Group restructuring?

It's safe to assume that the decision to restructure Ant Group into a more traditional bank-like entity is designed to offset Chinese governmental fears.

However, restructuring may also affect Ant's valuation as, typically, tech companies attract more investor attention — and money — than finance companies.

Speaking to CNBC, Michael Araneta, associate vice-president for IDC Financial Insights, suggested a selection of things to watch out for in the restructure. Top of the list was which subsidiaries will comprise this financial holding company, followed by the activities they will be doing — now and in the future.

“It is a concern also acknowledged by Ant Group as well. And there will be expectations and more clarity coming from the regulator about what can or cannot be done by these powerhouses in the platform world of technology,” said Araneta.

“It is a concern also acknowledged by Ant Group as well. And there will be expectations and more clarity coming from the regulator about what can or cannot be done by these powerhouses in the platform world of technology” - Michael Araneta, associate vice-president for IDC Financial Insights

 

More details on the restructure are expected to come out before the end of the Chinese lunar year (11 February).

 

Will Ant Group’s IPO be bigger than Kuaishou’s?

Should Ant Group make its public debut it would be one in a string of big-hitting China tech IPOs. The latest was Kuaishou Technology [1024.HK], which saw its share price triple in its first day of trading in the biggest tech IPO since Uber’s [UBER] in 2019.

Backed by Tencent, the Kuaishou app is one of the biggest social media platforms in China and its initial public offering raised $5.4bn. Kuaishou’s initial share price was HKD115, before rampant trading pushed it up to HKD345. It then dropped slightly to close at HKD300.

The size of these listings is also benefitting the institutions backing them. Japan’s SoftBank [9984.T], famous for backing start-ups, posted an $8bn profit from its tech-heavy Vision fund.

“There is a lot of liquidity out there and investors are particularly partial toward tech stocks. At some point the IPO fatigue sets in, but doesn’t seem like we are there yet. For now, the window of opportunity is open for SoftBank,” Justin Tang, head of Asian research at United First Partners in Singapore told Bloomberg.

“There is a lot of liquidity out there and investors are particularly partial toward tech stocks. At some point the IPO fatigue sets in, but doesn’t seem like we are there yet. For now, the window of opportunity is open for SoftBank” - Justin Tang, head of Asian research at United First Partners

 

 

Where next?

So, what about fears over antitrust legislation and Beijing’s interference? According to Masayoshi Son, the founder and CEO of SoftBank, and a long-time friend of Jack Ma, the crackdown is no different to the antitrust cases that have been seen in Western countries.

“In the US, Europe or Japan antitrust policy is something that’s already there. In financial business, there’s the banking law, securities law, there are many rules and regulations. Within this framework, you operate your business in a healthy manner. As you see some incidents or accidents, you learn lessons from there,” Son said at SoftBank’s Q4 earnings call. He said that he’d been in touch with Ma, although the two had not discussed business.

“In the US, Europe or Japan antitrust policy is something that’s already there. In financial business, there’s the banking law, securities law, there are many rules and regulations. Within this framework, you operate your business in a healthy manner. As you see some incidents or accidents, you learn lessons from there” - Masayoshi Son, the founder and CEO of SoftBank

 

If Son’s right, China tech could continue to provide investors with opportunity, especially if Ant Group’s IPO materialises on a similar scale to its hopes last year.

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