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August 26, 2020updated 16 Sep 2020 9:58am

Alibaba’s Ant Group to be worth at least $200bn in dual IPO

By Mohamed Dabo

Ant Group, an affiliate of Alibaba, is gearing up for its long-awaited dual listing in Shanghai and Hong Kong, which some analysts are valuing at between $200bn and $300bn, about three to four times the size of Goldman Sachs’ equity value.

The online payment provider, formerly known as Ant Financial Services Group and controlled by Alibaba founder Jack Ma, filed the prospectus for its initial public offering (IPO) yesterday.

An Ant representative declined to comment on the calculations, but the names of some of the people who stand to win big from the mega listing have emerged.

The lineup of billionaires

The biggest winner is, of course, Jack Ma, whose stake in Ant will be worth $25bn if it achieves the $225bn valuation people familiar with the matter have said the company is targeting. That could catapult him to among the world’s 10 richest people.

Ant chairman Eric Jing’s fortune will swell to $2.9bn, and another 17 current and former Alibaba and Ant executives will join the ranks of billionaires, based on the ownership structure described in the prospectus.

Most of the billionaires, whose combined stake is valued at $57.9 billion, are part of the Alibaba Partnership, an elite 36-person group set up a decade ago to encourage collaboration within the e-commerce giant, override bureaucracy and, crucially, determine the annual cash bonuses for all members of management.

Alibaba and Ant management members are core members of the group.

Victorious shareholders

Alibaba is the largest holder of the financial-services firm, with a 33%.

The remaining portion belongs to 29 other shareholders, including those that have invested in Ant over the years. Mr Ma is the ultimate controller of the group, according to the prospectus.

With a 30 per cent holding in Ant, Junhan’s stake is valued at $67.2bn, while Junao’s 21 per cent ownership is worth $46.5bn.

Mr Ma, Mr Jing, Ant chief executive officer (CEO) Simon Hu and non-executive director Jiang Fang own shares in the two entities through a general partnership vehicle called Hangzhou Yunbo Investment Consultancy Co.

The limited partnership structure allows the general partner – in this case, Yunbo, which Mr Ma controls – to exercise the entire voting power, regardless of the number of limited partners, according to Stephen Chan, a partner at Dechert, an international law firm in Hong Kong that specialises in corporate finance.

Mr Ma, however, has pledged to donate the economic interests of 611 million underlying Ant shares to charitable organisations and will lower his ownership to no more than 8.8%, as per the IPO prospectus and previous Alibaba filings.

Employee share-based incentives

Many tech startups lure employees with stock incentives that become lucrative when the company successfully completes an IPO. The Ant prospectus showed Junhan has granted share-based awards tied to Ant’s valuation to employees since March 2014, including to some new recruits and to reward performance of top performers.

“Share-based incentives are fairly common for tech companies,” Dechert’s Mr Chan said. “Equity could be used instead of cash to incentivise and attract the necessary talent.”

Back in 2015, at least 12 Junao shareholders became billionaires, including former Alibaba CEO Jonathan Lu and former chief risk officer Shao Xiaofeng, now the company’s secretary general.

The entity’s ownership structure has since changed amid various Ant funding rounds.

Ant Group will carry out its concurrent initial public offering on the Shanghai Stock Exchange’s STAR board and the Hong Kong stock exchange.

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