By Stella Yifan Xie in Hong Kong
Once seen as a disrupter of China's banking system, Jack Ma's financial-technology behemoth Ant Group Co. is becoming a national champion for the country as it prepares to go public with much fanfare.
Hangzhou-based Ant, one of the world's most valuable technology startups, on Monday said it is planning initial public offerings on stock exchanges in Hong Kong and Shanghai, skipping New York while trade and political tensions flare between the U.S. and China.
The news was timed to roughly coincide with the one-year anniversary of Shanghai's own Nasdaq-style STAR market, which top Chinese officials have been trying to nurture as a listing venue for homegrown technology stalwarts.
"It's like having Apple on Nasdaq," said Fred Hu, founder of Beijing-based Primavera Capital Group, a private-equity firm that has invested in Ant since its early days. He said Ant's listing at home will be a huge boost for the young bourse, and will also help solidify Hong Kong's status as an international hub for global capital.
For years, China's biggest and fastest-growing tech companies bypassed their home market and flocked to raise funds in New York or Hong Kong. Their listings abroad deprived many individual investors in China from profiting from their subsequent stock-price gains.
The tide is now turning. Ant Group, which owns the popular Chinese mobile payments network Alipay, is poised to become the first private technology company to list its shares concurrently in mainland China and offshore in Hong Kong. Back in 2018, smartphone maker Xiaomi Corp. tried to do the same but ended up listing only in Hong Kong after running into regulatory hurdles onshore.
Employees and other shareholders of Ant -- including state-backed Chinese funds, state-owned enterprises and global investment firms -- are now positioned to reap a windfall when the company goes public.
Mr. Ma, who founded Alipay when he was running Alibaba Group Holding Ltd., owns 8.8% of Ant, according to Alibaba's latest annual report. On Monday he paid a visit to Ant's headquarters and met with some employees, who surrounded him and took photos.
Ant never considered going public in the U.S., according to a person familiar with the company, even though Alipay's former parent Alibaba successfully raised $25 billion in a 2014 IPO on the New York Stock Exchange. The person said Ant's goal was always to list closer to home.
Ant's coming IPOs could be among the world's largest in history. The company was valued at $150 billion in a private fundraising round in 2018, and is aiming for a market valuation in excess of $200 billion, the person familiar with its plans said.
That would propel Ant into the ranks of the most valuable financial services companies globally. In the U.S., payments-processing giant Mastercard Inc. has a market capitalization of $313 billion, while PayPal Holdings Inc. is worth $210 billion following a sharp run-up in its shares this year. Goldman Sachs Group Inc., in comparison, has a market cap of $73 billion.
Ant, however, has been trying to shed its image as a financial company. Over the past few years, the company has been trying to compete less with banks and other traditional financial institutions in China, and position itself more as a technology provider to a wider range of businesses in the country.
That has helped reassure regulators that the company doesn't pose a threat to China's financial system, analysts say. Last month, it changed its name from Ant Financial Services to Ant Group, and said 60% of its employees now work in technology-related jobs.
"I think that kind of positioning is much better for Ant, as long as regulators view them as a positive for the entire financial industry rather than a competitor against existing players," David Dai, an analyst at Sanford C. Bernstein, said in an interview Tuesday.
Bernstein estimates that Ant's revenue was close to 140 billion yuan ($20 billion) in 2019, up sharply from around 100 billion yuan the previous year. About half of Ant's revenue came from its payments business, and that percentage is likely to drop in the coming years, it said in a November 2019 report.
Ant's origins date back to 2004, when Alibaba created Alipay as an escrow service for online shoppers on its e-commerce websites. In 2011, Alipay was spun out of Alibaba and expanded into a ubiquitous payments provider that let Chinese citizens make everyday purchases using their mobile phones.
The company known as Ant was established in 2014 to encompass Alipay and other financial services including personal credit lines, small-business loans, insurance and investment products.
Alipay also created what quickly became the world's largest money-market mutual fund, but in the process rattled some banks as millions of people diverted funds from their bank accounts into the high-yielding fund.
The rapid growth of Ant's flagship money-market fund also unnerved regulators, which pressured the giant fund to slow inflows and reduce risk among its assets. The fund known as Tianhong Yu'e Bao has shrunk in size, but more than 600 million people -- representing more than a third of China's population -- are still invested in it. Ant now also sells similar funds managed by other investment firms.
Ant's relationship with financial institutions is now more "collaborative," as most of the loans it makes come from banks' balance sheets, rather than its own, said Mr. Dai of Bernstein.
Within Ant, a long source of pride for many employees has been the company's leading edge in mobile payment technology, one of the few areas of technology where China leads the West.
In the U.S., PayPal, Apple Inc.'s Apple Pay and other online-payments networks have long tried to get consumers to switch to using their mobile phones for payments, but take-up rates have been low compared with China.
Along with its rival, Tencent Holdings Ltd.'s WeChat Pay, Ant pioneered an era in China where mobile payments became the dominant form of transacting both online and in physical stores.
Today, Alipay has more than 900 million active users in China and handled nearly 54% of the country's 204.8 trillion yuan ($29.3 trillion) in mobile-payment transactions last year, according to market research firm Analysys.
In a Monday letter to Ant's more than 12,000 employees announcing the company's listing plans, Executive Chairman Eric Jing advised staffers to remain calm and focused on the company's mission of solving problems and providing solutions to individuals and businesses. "Stay humble," his letter said in Chinese.
"An IPO has never been our end goal, but rather an important step in the evolution of our company and the fulfillment of our vision," Mr. Jing wrote.
--Jing Yang contributed to this article.
Write to Stella Yifan Xie at firstname.lastname@example.org
Corrections and Amplifications
This article was corrected at 10:02 a.m. ET because it incorrectly said Ant would be the first to list shares concurrently in mainland China and offshore in Hong Kong. Ant Group is poised to become the first private technology company to list shares concurrently.