BackInside Ant, the company behind the world’s biggest IPO
Chinese fintech giant, the world’s most valuable startup, is about to make history with record-breaking IPOs in Hong Kong and Shanghai
PremiumWhat Is Ant and What Is It Worth?
Ant Group Co.’s initial public offering is poised to break global records for total funds raised. The company became the world’s most valuable startup after a fundraising round in mid-2018 that valued it at $150 billion, and could raise more than $34 billion with its coming listings and earn a valuation well in excess of $300 billion. That would place it among the world’s most valuable technology companies.
Ant is going public at a later growth stage than other technology companies that are now world leaders.
How Did Ant Get Started?
Ant grew out of an online escrow service called Alipay that was created in 2004 within online retailer Alibaba Group Holding Ltd. Jack Ma, Alibaba’s co-founder and then-chief executive later carved out the business. That led to an outcry from Alibaba’s foreign investors, before Mr. Ma created a way Alibaba would continue to profit.
Mr. Ma, who retired from Alibaba last year, is still Ant’s controlling shareholder with slightly more than 50% of its voting rights. Ant’s name reflects the company’s goal of serving individuals and small businesses that have long been ignored by many Chinese financial institutions.
What Is Alipay and How Does It Work?
Ant operates Alipay, a lifestyle and payments app with more than one billion users in mainland China. It now handles more transactions yearly than Mastercard and Visa. The vast majority of Alipay’s transactions take place in China.
Alipay helped popularize the use of QR, or quick-response, codes, which can be scanned with mobile phones or bar code readers at numerous venues to make payments within seconds.
What Else Does Alipay Do?
Alipay’s mobile app has many functions besides payments. People can use it to shop on Taobao, the big online marketplace run by Alibaba, invest in mutual funds, buy insurance policies, keep track of utility bills, borrow money, and find deals from local businesses. Users can also get Covid-19 updates and other information.
Ant says it isn’t primarily a financial company, but a technology-solutions provider that connects individuals and small businesses with banks, asset managers and other financial-services providers. Alipay sits between individuals and businesses and facilitates a range of financial transactions.
How Does Ant’s Loan Business Work?
Alipay connects about 100 banks in China to consumers and small businesses that need short-term loans. Its credit businesses, Huabei (which means “just spend") and Jiebei (which means “just borrow"), originate loans to millions of individuals. MYbank, an Ant affiliate, provides loans to small businesses. Banks underwrite the debt, take the credit risk and collect interest payments, while Ant collects fees for facilitating the transactions.
How Do People Invest Using Ant?
Ant partners with around 170 asset managers, including mutual funds, insurers, banks and securities firms in China, to originate investment solutions for Alipay users. The app offers more than 6,000 products ranging from mutual funds to bank time deposits. Of them, the signature product is Yu’e Bao, which lets people put their spare cash in money-market funds. The first Yu’e Bao fund, run by Tianhong Asset Management, was once the world’s largest money-market fund. A robo adviser operated by Ant and Vanguard Group helps investors pick which funds to invest in for a small fee. Ant’s InsureTech business, meanwhile, sells a range of insurance products that cover everything from shipping delays to accidents.
Is Ant Profitable?
Yes. In the first half of this year its operating margin was 34%, meaning that for every dollar it took in as revenue, it made 34 cents of profit, before interest and tax payments.
That revenue comes from two main sources. Ant collects fees from merchants when people transact with Alipay, and earns fees from banks and other financial companies that make loans or sell investment products on its platforms. Even though mobile payments are a large and growing part of Ant, revenue from its digital finance platforms is growing faster.
While Ant is a giant in China, its global presence is fairly limited. Alipay has expanded abroad to retailers in the U.S., Europe and other countries, but it mostly serves as a payment option for Chinese tourists outside of the country. Ant has also taken stakes in overseas payment companies that have digital wallets, and provides some cross-border remittance services. The vast majority of its revenue still comes from China.
This story has been published from a wire agency feed without modifications to the text
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