Ant Group’s initial public offering has prompted a rush among investors to secure a piece of the world’s biggest ever stock sale, helping to push the fundraising total to almost $37bn.
The Chinese payments group’s dual IPO across Shanghai and Hong Kong has generated huge demand among institutional funds eager to participate in one of the global market’s hottest deals, as well as retail traders willing to take on huge amounts of leverage.
The Shanghai side of the book-build was completed on Thursday. Banks triggered a so-called greenshoe option to increase the offering after retail bids exceeded the value of the shares on sale by more than 870 times, equivalent to Rmb19.1tn ($2.8tn) — or about equal to the UK’s gross domestic product last year. The expanded deal valued the company at about $316bn.
The Hong Kong institutional book-build was completed on Wednesday, a day earlier than planned due to bumper demand, according to a person with knowledge of the matter. The retail allocation for this leg is expected to wrap up on Friday. A further greenshoe option on this side of the deal could take total funds raised to $39.6bn.
Among the investors struggling to secure its preferred allocation is GIC. The Singaporean sovereign wealth fund believes it will have to settle for only a slice of the $1bn in Ant shares it wants in the IPO, according to two people familiar with the matter.
The deal has set off a frenzy among retail investors. Some in Hong Kong are willing to borrow huge amounts of cash in their bid to secure shares, with brokers happy to oblige.
“We will provide around HK$35-40bn ($4.5-5.8bn) for margin financing, or even up to HK$50bn in the case of popular demand,” said Edmond Hui, chief executive of Bright Smart Securities, a Hong Kong brokerage that is lending punters up to 20 times the amount they put down. Using such high levels of leverage means share investments can be subject to spectacular gains and losses on relatively small movements in the stock price.
A spokeswoman for Bright Smart said it provided HK$25bn in margin financing on the first day of sales on Tuesday. She added that some customers had “asked all their family members to subscribe to it to increase their opportunity”.
“Unless you use leverage or margin financing you might not be able to get” shares, said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai. He added that retail investors might need to put down a minimum of $129,000 to secure a “good amount” of Ant stock.
Some are willing to front significant amounts of cash for Ant shares despite not knowing what the company does. Lee Wing-chun, a retiree in his 70s, wants to borrow HK$90,000 to leverage his HK$10,000 investment. “I don’t really know what the Ant Group is doing . . . but you will always win from subscribing to new stocks,” he said. “I’ve almost never lost money.”
Ant has come under scrutiny in mainland China for offering retail investors access to the Shanghai leg of its share sale through an exclusive arrangement with five mutual funds via its own app.
Another explanation for demand outstripping supply is a decision by Alibaba, the Chinese internet group from which Ant was spun off, to subscribe to about 44 per cent of the Shanghai portion of the IPO, via a company unit.
The move, which puts Alibaba’s stake at about a third of Ant, limits the allocation available to other investors. “They don’t want to lose control,” said Richard Harris, chief executive of Hong Kong-based Port Shelter Investment Management.
Capping the number of shares available to outside investors may also help to ensure an impressive first-day pop in Ant’s share price as investors left out of the IPO scramble for shares in the secondary market.
There is “less supply in the public float, and more upward pressure on the price”, said one Hong Kong-based broker.
Ant Group declined to comment.