Alibaba shattered records last year with its $25 billion flotation and it appears that it is just getting started. The Chinese e-commerce giant is also planning to take its financial services company, Ant Financial Services Group, public in the next few years.
Internet companies are increasingly tapping into their vast customer base to expand into online and offline financial services, a trend that many expect will continue and could set the stage for a spar with traditional banks.
With no blockbuster Asian IPOs on the horizon for 2015, some industry observers are already looking ahead to Ant Financial. JG Capital, a tech-focused investment research firm, values the entity, which handles all of Alibaba’s payments online, at $25 billion.
“We have witnessed the evolution from search to e-commerce and beyond, and we are now starting to see start-ups using technology to shake up the more traditional sectors of the economy,” Neil Atkinson, head of Asia Pacific for BNY Mellon’s depository receipts business, said. “We expect these [companies], particularly ... in areas like finance, such as peer-to-peer lending, to come to market.”
Earlier in February Jack Ma publically said that Alibaba intends to list Ant Financial Services, which consists of six businesses: Alipay, Alipay Wallet, Yu’e Bao, Zhao Cai Bao, Ant Credit and MYbank. No formal timeline has been set, although the IPO could happen in 2016 or 2017. A spokeswoman declined to comment on reports of the IPO or the timeline.
Although it’s still early, banks are undoubtedly already vying to get on this deal, not only for the size but also because of the industry it is in. Fintech, a new term loosely defined as a market that integrates finance and technology, has yet to make a splash in equity capital markets.
According to Dealogic, there have only been three fintech ECM deals since 2008 that have raised more than $100 million.
Notably, while the top-10 deals since 2008 have all been under regional bookrunners, the second- and third-highest deals — Oracle Financial Services Software’s $183 million follow-on in 2013 and Longtop Financial Technologies’ $133 million placement in 2009 — were both completed under the joint leads of Deutsche Bank and Morgan Stanley, Dealogic data showed.
No banks have been selected yet for Ant Financial, which is an affiliate of Alibaba, and it’s not clear if Alibaba has begun short-listing, although some observers speculate that the banks on Alibaba’s highly successful initial public offering — Deutsche Bank, Morgan Stanley, Goldman Sachs, JP Morgan, Credit Suisse, and with a more junior role, Citi — are likely candidates because of their knowledge of the group gained during the world’s largest ever IPO.
Few banks anticipate that a smaller fintech peer will list this year to pave the way for Ant Financial’s flotation, which is what happened last year with JD.com and Alibaba. (Online retailer JD.com’s $1.8 billion IPO in May was seen as a barometer for Alibaba’s $25 billion flotation in September.)
Still, it is clear that fintech is the sector to watch. While the internet finance industry is still small and faces a number of hurdles — regulation, capital, funding, due diligence — it is growing fast. And as it grows, these companies will undoubtedly turn to equity capital markets.