November 28, 2020
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Ant IPO Sets Off $3 Trillion Scramble Among Small Investors

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Ant is the owner of the payments and lifestyle app Alipay, which as of June counted more than one billion annual active users.

Ant is the owner of the payments and lifestyle app Alipay, which as of June counted more than one billion annual active users.

Photo: alex plavevski/Shutterstock

To
Ant Group Co.
’s set of staggering statistics—a billion users, more than $17 trillion in yearly payment volumes—add one more: trillions of dollars in stock orders from small investors.

Late Thursday, the Chinese financial-technology giant said individual investors in mainland China had placed the equivalent of more than $2.8 trillion of orders for their slice of Ant’s record-breaking initial public offering, in which it is listing simultaneously in Shanghai and Hong Kong.

That sum exceeds the value of all the stocks listed on the exchanges of Germany or Canada. Mom-and-pop investors in Hong Kong have also clamored to buy into this IPO, betting that Ant will soar in value after it goes public next Thursday.

More than 5 million individuals placed orders for shares in Shanghai, a record for IPO subscriptions on the STAR Market, a Nasdaq-style technology-focused board that launched last year. Orders exceeded the shares reserved for small investors more than 870 times.

The figure is more impressive given the high hurdles for participating in Star IPOs: Individuals must have at least two years of stock-trading experience and brokerage-account assets totaling at least 500,000 yuan, the equivalent of $74,300. The IPOs are routinely heavily oversubscribed and stocks often soar after listing.

In Hong Kong, retail investors placed orders exceeding the 2.5% of shares initially reserved for them by 389 times, a person familiar with the matter said. That triggered a mechanism boosting their slice of the deal to 10%. Some small investors have borrowed from banks and securities brokers to make their orders up to 20 times bigger in hopes of boosting their chances of getting shares.

“I’m all in with Ant,” said Joe Chang, a manager at an e-commerce company in Shenzhen who placed an order in Hong Kong because he feared coming up dry in Shanghai. He said he used all the funds in his Hong Kong brokerage account, equivalent to about $52,000, to secure a 95% margin loan and place a roughly $1 million order. He sees a good chance of getting shares by placing a comparatively large order.

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“It’s absolutely a must-have regardless of the price,” Mr. Chang said, pointing to the company’s fast growth. “Ant is ubiquitous in mainland China.”

The company has already sold shares to institutional investors for its two-part deal, which is split equally between Hong Kong and Shanghai. The IPO is expected to be worth a record $34.4 billion, which could rise to the equivalent of about $39.5 billion if underwriters in both cities exercise their option to increase the deal’s size by 15%.

Twelve major banks and brokerages in Hong Kong have extended loans totaling more than 470 billion Hong Kong dollars, the equivalent of $60.6 billion, to prospective retail buyers, according to figures tallied by The Wall Street Journal. More than half was provided by
HSBC Holdings
PLC and
BOC Hong Kong (Holdings) Ltd.

Felix Fan, 29 years old, said he placed a HK$10 million order through online brokerage Futu Securities, using borrowed money to increase his bet 10-fold. Mr. Fan, the founder of a tech startup in Hong Kong, said he liked Ant partly because of his faith in Jack Ma, the
Alibaba Group Holding Ltd.
co-founder who also controls Ant. “Jack Ma is my role model,” he said.

The Chinese fintech titan Ant Group is seeking to raise more than $34 billion in what is due to be the world’s biggest-ever initial public offering. WSJ explains how Ant’s backbone service, Alipay, has revolutionized payments and investing in China. Photo Composite: Crystal Tai

“The technology sector is a winner-takes-all market,” he added. “Ant as a market leader will only grow bigger and bigger.”

Dennis Wu, senior partner at Futu, said one thing underpinning strong orders in Hong Kong was spillover demand from mainland Chinese investors. He said more than 200,000 customers had placed orders totaling more than HK$48 billion, the equivalent of about $6.2 billion, using margin loans and cash.

Helping stimulate retail participation is the small minimum purchase, said Edmond Hui, chief executive of Hong Kong brokerage Bright Smart Securities. Investors can get in for the price of 50 shares—US$516, given an IPO price of about $10.32 a share.

Betting on IPOs has grown more popular in recent years in Hong Kong, as stock-exchange overhauls have made it easier for technology companies to list, and big tech stocks such as Alibaba, which holds a stake in Ant, have soared in value. Low interest rates have made potential quick profits from flipping IPO stocks even more appealing—and made it cheaper to use borrowed funds for investing.

Choi Wing Kam, 47, a purchasing manager at a trading company, said she put down the equivalent of $5,160 for Ant, using 10-times leverage from local brokerage Phillip Securities Group. “Saving rates are so low these days. Investing in stocks like Ant is a way to get better returns for my money,” said Ms. Kam.

“The deal is so hot, it’s literally a lucky draw,” she said.

Write to Joanne Chiu at joanne.chiu@wsj.com

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