HONG KONG—Ant Group Co., the Chinese financial-technology
giant controlled by billionaire Jack Ma, revealed how highly profitable its
business has been as it gears up for what is likely to be a record-breaking
initial public offering.
The owner of the popular payments and lifestyle app Alipay
on Tuesday filed listing documents for IPOs on stock exchanges in Shanghai and
Hong Kong, publicly disclosing for the first time detailed financial data
showing the size and scale of its business.
Ant said it made 21.2 billion yuan ($3 billion) in net
profit for the six months to June 2020, on revenue of 72.5 billion yuan ($10.5
billion). That implied a net profit margin of around 30%, fairly high for a
relatively young company that is growing rapidly.
The Hangzhou-headquartered company is aiming to go public as
soon as this fall, and is targeting a market valuation above $200 billion, The
Wall Street Journal previously reported. Ant said in one of its filings that
the new shares it plans to sell would comprise at least 10% of the company’s
share capital, implying that it could raise more than $20 billion.
If achieved, it would propel Ant into the ranks of China’s
most valuable listed companies and the world’s top financial-technology
companies, in the vicinity of PayPal Holdings Inc. PYPL 1.40% and Mastercard
Inc., MA 1.23% which recently had market capitalizations of $233 billion and
$344 billion respectively.
Ant’s origins date to 2004, when Alipay was first created to
facilitate payment transactions on e-commerce sites operated by Alibaba Group
Holding Ltd. Alipay subsequently expanded into a payments provider for a range
of online, in-store and other retail and business transactions.
A predecessor to Ant was spun off from Alibaba in 2011, and
the company became known as Ant Financial Services Group in 2014. It changed
its name earlier this year to Ant Group. Alibaba, whose New York IPO raised $25
billion in 2014, currently owns a third of Ant, while Mr. Ma controls 50.5% of
Ant’s voting rights, the filing said.
Alipay, which Chinese citizens use for a wide range of
financial transactions, had 711 million monthly active users as of June, and
more than one billion annual active users, according to Ant’s filing.
Ant said its revenue grew roughly 40% in the first half as
well as in 2019, when it collected 120.6 billion yuan ($17 billion).
About 43% of its revenue last year came from what the
company called digital payment and merchant services. Ant said Alipay handled
118 trillion yuan ($17 trillion) worth of transactions in mainland China in the
year to June, and international transactions totaling 622 billion yuan. Alipay
charges merchants fees based on a percentage of their transaction volumes, and
more than 80 million businesses use its mobile app.
The bulk of Ant’s other revenue came from what it calls its
digital finance technology platform, which collects technology-service fees
from numerous banks, asset managers and insurance companies that use Alipay to
make loans, sell mutual funds, insurance and offer other products to customers.
Ant said its consumer and small-business lending platforms
had a 2.1 trillion yuan ($300 billion) credit balance and its wealth management
platform facilitated 4.1 trillion ($590 billion) worth of investments as of
June 30. Most of the loans have been funded by banks that the company partners
with.
During the first half of 2020, Ant said the Covid-19
pandemic and resulting lockdowns hurt consumption across China, particularly in
stores and other offline venues, and negatively affected growth in transaction
volumes and the performance of its lending operations. Still, some analysts
said big jumps in Ant’s first-half revenue and profits showed the company’s
ability to withstand economic shocks.
“The Covid impact didn’t slow them much as expected; instead
it provided a boost” to other online transactions and offset disruption in some
areas, said Duncan Clark, chairman of BDA China, a business consulting firm,
and author of a book about Jack Ma and Alibaba.
Ant’s filing Tuesday flagged regulation in China as a
potential risk factor. It said that in 2019, the People’s Bank of China issued
a draft regulation on financial-holding companies. It might become subject to
that if the central bank moves forward with new rules.
The company has long contended that it is a technology
company rather than a financial-services firm, a view that was behind its
recent name change.
Ant also noted how geopolitical tensions between the U.S.
and China have led to a worsening relationship between the two countries,
resulting in “intense potential conflicts between the two countries in trade,
technology, finance and other areas.” It said this has raised the prospect of
increased regulatory challenges or restrictions on Chinese technology
companies, including itself and Alibaba in a range of areas.
Two years ago, Ant was valued at $150 billion in a $14
billion fundraising round that drew large checks from both domestic and global
investors.
The company’s filings Tuesday listed numerous domestic and
foreign institutions as shareholders, including China’s national pension fund
and other state-owned institutions; Singapore and Malaysia’s sovereign-wealth
funds; units of private-equity firms General Atlantic and Warburg Pincus; the Canada
Pension Plan; and mutual-fund managers T. Rowe Price Group Inc., BlackRock Inc.
BLK -0.11% and Fidelity Investments. Some of these investors have significantly
marked up the value of Ant shares they hold.
Ant’s coming listing will provide a big boost to China’s
nascent STAR Market, which was established a year ago to draw listings from
homegrown technology companies. Inside the company, the listing plan has been
called “Project Star,” the Journal previously reported.
The company intends to use 30% of its IPO proceeds to expand
its user base and on digital services, 40% on innovation, research and
development, and the rest on cross-border payment and general corporate use,
its filings said. Ant had 16,660 employees at the end of June.
Citigroup Inc., C 1.16% JPMorgan Chase JPM 0.46% & Co,
Morgan Stanley MS -0.61% and China International Capital Corp. 3908 -0.54% were
listed as joint sponsors of Ant’s Hong Kong IPO. CICC and China Securities Co.
Ltd. are the joint sponsors of the Shanghai share sale.
Write to Stella Yifan Xie at stella.xie@wsj.com
and Jing Yang at Jing.Yang@wsj.com
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