The Alibaba Holding Group Ltd. BABA,
-1,18%
– the affiliate controlled by Jack Ma has filed documents to list its shares simultaneously on the Hong Kong and Shanghai stock exchanges. Ant, who runs the hugely popular Alipay mobile wallet in China, is reportedly looking to raise at least $ 35 billiona bid that could value the company at $ 250 billion, according to Bloomberg.That would make Ant’s bid larger than that of Saudi Aramco, which grossed more than $ 25 billion in the largest IPO to date. A valuation of $ 250 billion would make Ant worth more than Bank of America Corp. BAC,
+ 0,34%
($ 207 billion) and PayPal Holdings Inc. PYPL,
+ 0,31%
($ 213 billion) but less than JPMorgan Chase & Co. JPM,
-0,08%
($ 287 billion), Mastercard Inc. MA,
+ 1,13%
($ 336 billion) and Visa Inc. V,
+ 0,07%
($ 427 billion).

The company is best known for its mobile payments offering, but it aims to be a one-stop financial center that also offers access to wealth management, investment and insurance services. Analysts see the payments side of the business as a gateway that brings users to Ant’s more complex offerings.

Here are five things to know about Ant as he prepares for his public debut.

A sprawling financial empire

Unlike Western mobile wallets, Ant’s platform addresses almost every aspect of a person’s financial life. Ant goes beyond what PayPal and Apple Inc.’s AAPL,
+ 1,02%
Apple Pay does this, offering services for everythingpayments and credit to insurance and investments within Alipay, which the company calls a “ubiquitous super app.” Ant has over 1 billion annual active users for the Alipay app and 711 million monthly active users.

The Alipay app is “synonymous with digital payments in China,” Ant said in his filing. Bernstein analyst Kevin Kwek sees the payment component as a “hook-up” for the business that may have limited profit potential but that helps the business attract new users who can then try out new ones. more lucrative services.

App-based payments are rife in China, even for in-person transactions, and this is perhaps the most well-known aspect of Ant’s business. But other areas of the business are more interesting, Kwek argued in a note to clients, particularly the company’s lending business, in which Ant provides loans that are almost entirely underwritten by financial partners, which which gives the company useful information about loans without requiring them to take a lot. balance sheet risk.

The credit business is “maybe the crown jewel” of Ant’s business, Kwek wrote. According to his calculations, with a “conservative” assumption that the company made only one loan to each of its 500 million customers in the past 12 months, Ant would have issued 16 loans per second.

“Everyone has heard of the ‘fintech model’dataonline activities will be used for underwriting and everything will happen digitally (and quickly, even instantly),” he wrote. “But seeing growth on this scale has indeed been a surprise.”

Ant also offers investment services through the distribution of money market funds, as well as wealth management and insurance options.

Closely related

Alibaba previously had a profit-sharing deal with Ant in which Alibaba received 37.5% of the company’s pre-tax profits, but Alibaba announced in early 2018 that it would switch to an equity structure. Alibaba now owns a 33% stake in Ant through its subsidiaries, a move that analysts say would help the Chinese e-commerce giant benefita possible IPO of Ant down the line.

“Equity participation allows us to participate in the long-term value creation of Ant Financial as opposed to the quarterly fluctuations of profit-sharing,” Executive Vice President Joseph Tsai said on the earnings call of the company at the time.

Beyond equity participation, Ant and Alibaba collaborate on business issues. “We, along with Alibaba, are building the infrastructure for commerce and services,” Ant said in his brief. Businesses work together by “sharing information”their platforms, expanding their cross-border efforts and “jointly serving” consumers and merchants. Ant lists synergies with Alibaba among its sales forces in its filing.

Slot machine

Ant generated 120.6 billion RMB ($ 17.7 billion) in revenue during 2019, up 85.7 billion RMB a year earlier. The company’s latest annual total consisted of RMB 51.9 billion in digital payment income and RMB 41.9 billion in credit technology income. Ant added 8.9 billion RMB in income insurance technology and 17 billion RMBinvestment technology.

The company recorded a non-IFRS profit of RMB 24.2 billion for 2019, after recording a loss of RMB 18.3 billion the previous year. Non-IFRS profit represents profit before recognition of compensation in equity, royalty and service payments, gains on disposal of subsidiaries and certain other items.

Competition

Ant’s main competitive pressures comeTencent Holdings Ltd. 700,
-1,75%

TCEHY,
+ 0,18%,
which operates the WePay platform, but while businesses are close in terms of the consumer spending they help facilitate, Bernstein Kwek said Ant is “way ahead” in other areas of its business.

“Ant is ~ 5 times bigger on loans under management, ~ 4 times bigger on assets under management on the wealth management side, and ~ 3 times bigger on insurance partners,” he wrote in a note. to customers. “Tencent’s competitive threat exists, but is not that great today.”

The real question for Kwek is what will Alibaba need to do to maintain its advantage. That could mean “a limited increase in subscription rates,” or the amount of money Ant keeps to help facilitate various financial interactions as the company fights the competition.

The biggest pain point for Alibaba could comethe Chinese government, which has erected obstacles to Ant’s growth in the past. Ant mentions in her dossier that “China’s laws, rules and regulations are extremely complex and constantly changing” when it comes to obtaining and maintaining the proper permits to do business.

“They could change or be reinterpreted as being onerous or difficult for us, the companies on our platform or our partners to respect,” the company warned.

How to invest

While Alibaba’s shares are listed in the United States and Hong Kong, Ant is aiming for a double listing of its shares in Hong Kong and Shanghai amid mounting tensions between the United States and China. The US government is seeking to impose stricter restrictions on Chinese companies listed on US stock exchanges.

As Ant’s shares are expected to be listed in Hong Kong and Shanghai, the process of buying these shares is not as straightforward for US investors as it would be for stocks listed on US stock exchanges. Investors should check with their brokerage firms for specific rules.

A spokesperson for Interactive Brokers Group Inc. IBKR,
-0,36%,
for example, told MarketWatch that its international investors can access stocksboth exchanges. Spokesman for Charles Schwab Corp. SCHW,
-1,20%
said clients could access stocks listed in Hong Kong but not those listed in Shanghai. A Robinhood spokesperson said the company does not currently support trading of shares on foreign exchanges.