Alibaba Grouping Holding Ltd. (NYSE:BABA) has announced that it will subscribe to a fifth of Ant Group Co. Ltd.’s A share in its upcoming IPO. This represents around 730 million shares of the 1.67 billion a shares that Ant Group will initially list on the Shanghai Stock Exchange.
Alibaba agrees to buy a 22% equity stake in Ant ahead of IPO
The eCommerce giant has agreed to buy 22% of the A shares as part of strategic investors’ placement. Ant Group plans to issue another 1.67 billion shares on the Hong Kong exchange bringing total IPO shares to 3.3 billion. Also, the financial services company will issue around 1.16 billion shares listed in HKSE to Alibaba. This is part of the distribution of around 3.26 billion shares to current backers.
Ant Group plans to allow underwriters to buy more shares in the offering. The over-allotment option represents over 15% of the total shares that the company will initially offer. Currently, Alibaba holds Ant Group’s ordinary shares and also class C stock of Ant International Co. In total, Alibaba’s equity interest in Ant Group is around 33%, subject to completion of the subscription and redemption arrangement.
Ant Group IPO to be worth $35 billion
Jack Ma’s Ant Group is gearing towards the largest IPO in the coming weeks. the IPO has been estimated to be worth around $35 billion and will surpass Saudi Aramco’s $29.4 billion listings in December last year. Alibaba’s deal will help in preventing its equity stake in Ant Group once it goes public. The IPO has drawn strategic investors’ interest from the likes of Singapore’s GIC Pte wealth fund. Others are Temasek and China’s National Council for Social Security Fund. The strong demand implies that the Alipay operator could bring a valuation of around $280 billion. This is despite concerns that the Trump administration is pondering the possibility of more restriction of the fintech giant.
According to a prospectus filed at the Shanghai stock exchange, Ant Group saw a 74% growth in gross profit since the beginning of the year.