The company, formerly known as both Ant Financial and Alipay, Ant Group, is an affiliate company of the Alibaba Group. Ant Group owns the largest Chinese digital payment platform, Alipay. Alipay has over 80 million merchants and one billion users. Unfortunately, the Ant Group has stated that its plans for an IPO have delayed indefinitely. The reason for this delay is due to the ongoing Chinese crackdown on the Chinese tech industry.
The various bankers who, in 2021, discussed a Hong Kong exchange-based Ant Group IPO and were making predictions of a second half of 2021 or early 2023 listing, are now, according to an article from The Information, saying that an IPO is no longer on the table.
This new reporting arrives after Warburg Pincus, a major Ant Group investor, cut its valuation of Alibaba’s Fintech unit to below $200 billion in late 2021. In October 2021, Reuters also reported that the Ant Group was forming a Joint Venture with Zhejiang Tourism Investment Group and some other Chinese state-backed agencies to create a credit-scoring firm. The investment was intended to meet the regulators’ demands for restructuring, allowing the IPO to get back on track.
These efforts all seem to have been unsuccessful to date.
At the end of 2020, the Ant Group was preparing for a dual listing IPO, which would have likely resulted in a record-setting $34.5 billion in capital raised. Sadly for investors and the Ant Group, the regulators had pulled the initial offering only days before the listing was complete. At the time, the Ant Group estimated to be worth about $315 billion. The Chinese government shut down the IPO plans because it was concerned that the tech company had overreached and that there were too few regulations surrounding the Ant Group’s financial products.
In July 2021, Fred Hu, the Ant Group’s director, spoke to the Nikkei, stating his expectation was that the company could resume its IPO pathway “before too long.”
And before Hu’s statements, China’s central bank announced (Chinese regulators ordered) that the Ant Group would restructure into a financial holding company. This announcement was two days after the parent company Alibaba had to pay a $2.75 billion penalties for antitrust violations. Ant Alibaba and others have been at the center of the tightening controls of the Chinese government on what it called, the “platform economy.”
With the most recent news, it is expected that the Ant Group will have a long path to any future IPO. We will certainly keep watching.
While all of this is terrible news for those that were interested in an Ant Group IPO, all is not lost. You can still always take advantage of Alibaba (BABA) stock, of which Ant Group is an affiliate. The BABA ADRs that are available through the NYSE are down, so be careful.
The earnings for Alibaba have not been great lately, which is causing the stock price to fall, and the continuing Covid-19 outbreaks in China and the government’s Zero-covid policy shutting down whole cities has not helped; however, the current price can be reduced.
Investors will be hoping for good news on May 12th, the next earnings release for Alibaba. The current projections have a reported earning of $1.06/share, which would be a 32.91% year-over-year decline. In the last year, BABA's share price has fallen by about 62%, so this estimate has probably already been factored into BABA's share price.
Looking at its current valuation, Alibaba’s Forward P/E ratio is sitting at 12.74. When comparing it to its industry rivals, they have an average Forward P/E of nearly double that at 23.89, leading us to believe that the current BABA price is discounted.
What could drive future growth of BABA?
In the past year, cloud services were only 8.5% of BABAs revenue, but with the industrial digitalization of China. The company can better protect itself against volatile market conditions surrounding its e-commerce and financial segments. BABA estimates that the size of the Chinese cloud computing market to be $158.27 billion by 2025. The current penetration rates are at less than 7% of market share. As more and more industries realize the possibilities of data-driven service benefits in a linked digital world, BABA’s cloud computing can become an important revenue driver along with its powerful Chinese e-commerce segment. After supplying extensive cloud services to the recent Beijing Winter Olympics, Baba stated that digitization would be available in several new industries, including electric vehicles, healthcare, and financial services.
To stay up to date on all upcoming IPOs, please visit Preipohunter.com and download the 2022 IPO Guide.
The information provided in this article is for information purposes only. This article and its content are not, and should not be deemed to be an invitation to engage in any financial activity. This article should not be construed as advice or a personal recommendation. We are not authorised and regulated by any Financial Authority. The content of this article is not authorised by any financial authority. Reliance on this promotion for the purpose of engaging in any financial activity may expose an individual to a significant risk of losing all of the funds.