IPO fever has gripped China’s tech space in recent times as rumors swirl that some of the biggest names are eying listings on the Hong Kong bourse. This week, it was the turn of Alibaba’s fintech affiliate Ant Financial.

Ant Financial was quick to distance itself from concrete plans for a dual-listing plan, while previous subjects have done similar.

Local media reported on Saturday that Ant Financial harbored ambitions of floating shares in Hong Kong, beating a slew of US-listed Chinese tech firms to the punch. On Tuesday, further reports surfaced that the $150 billion Alipay operator was not only looking at a listing but also a mulling a dual-listing of both A and H-shares. A-shares refer to those listed on China mainland bourses in Shanghai and Shenzhen, while H-shares are those listed in the southern special administrative region.

Investment banks China International Capital Corp. and Credit Suisse had been working with Ant Financial on IPO preparation for some time, according to the reports. The Hangzhou-based fintech firm took to Weibo to promptly reiterate that the firm doesn’t a plan nor timetable for an IPO, with market watchers left speculating.

“They are being equivocal with their words,” Esme Pau, an analyst at China Tonghai Securities, told TechNode. “The company said there would not be a dual-listing of A and H-shares at the same time, but did not say outright that they will not list in A- OR H-shares,” he said.

Despite the denial, some see an Ant Financial IPO as an inevitability. “Ant Financial has been entertaining the label of ‘world’s most valuable unicorn’ for quite some time now,“ said Alex Sirakov, senior associate at fintech research firm Kapronasia. “Although there is no confirmation for an IPO, in my opinion, it is natural to expect one soon,” he added.

A long time coming

Talk of an Ant Financial IPO is nothing new. The buzz around a possible listing dates back to  2016 when the company hit a valuation of $60 billion. Political uncertainties reportedly led to a rethink. Reports of a Hong Kong dual-listing in April 2018 again ramped up the speculation. 

Ant Financial raised around $14 billion in a Series C round in June that year, said to be the biggest-ever single fundraising deal completed by a private company at that time.

Internal changes at Ant Financial may have fueled the most recent rumor. Alibaba gained approval last September to retake one-third equity of Ant Financial via newly issued shares, thereby concluding five years of corporate restructuring.

At the time, international media stated that the move “paves the way” for Ant Financial to go public. The move coincided with an executive reshuffle, further fueling the speculation.

“Recent changes in the capital structure and the management echelon of the firm may hint about that, along with the overall trend of various political and economic incentives in China to incite the growth and maturity of China capital markets,” Sirakov said. “This, paired with the organic need that Ant Financial needs to further validate positions beyond its home turf, may justify a decision to go public sooner and move to the next level of corporate development,” he added.

Ant Financial has been aggressively expanding into Southeast Asia and Europe. Listing in Hong Kong, rather than China’s mainland, could help with the expansions.

“Mainland markets entertain liquidity, but predominantly in RMB, which can be an issue when a company intends to use the IPO proceeds for international expansion,” said Sirakov. China’s exchanges are also more susceptible to volatility. By contrast, Hong Kong is a sophisticated and mature market and, therefore, a natural choice for Asian blue chips. 

Other factors include the US-China trade war. However, Beijing has looked to boost the quality of capital markets within its domain, Sirakov added.

Tech firms look south

Recent demonstrations have hit Hong Kong’s capital market hard, but the tide seems to be turning.

US-listed Chinese firms like Trip.com Group and NetEase reportedly held initial talks at the start of the month with the Hong Kong bourse over secondary listings. Additionally, Baidu has allegedly completed an internal assessment for a secondary floatation in the special administrative region, according to another report posted days later. 

The push for blue-chip dual-listings comes as Washington is heightening scrutiny of Chinese companies. Alibaba’s $13 billion secondary listing in Hong Kong in November also boosted confidence.

“There are a lot of tech companies hoping to list in Hong Kong,” Tonghai Securities’ Pau added. “For one, the market sentiment is more upbeat than before. Second, the level of uncertainty caused by the trade war will increase with time.”

The trade war has extended to capital markets. President Trump was reportedly considering delisting Chinese companies from US markets in September.

“My view on a second listing is it’s a smart move given the talk last year about banning Chinese companies from US capital markets, regardless of the practicality of a ban like that,” James Hull, an analyst and portfolio manager at Hullx Capital, told TechNode.

While Chinese tech firms are keeping a tight lid on any listing plans, market watchers believe going public is the logical step considering the current climate. For Ant Financial, the upside of a Hong Kong IPO is the comparatively mature market state, while listings also face less scrutiny compared with those stateside. For US-listed tech companies seeking a secondary listing, Hong Kong could help them hedge risks amid the ongoing trade tensions.

Editor’s note: This article has been updated to reflect that Ant Financial has never confirmed or denied dual listing but stated that the firm doesn’t have a plan or timetable for an IPO at present.

Nicole Jao is a reporter based in Beijing. She’s passionate about emerging trends, news, and stories of human interest within the world of technology. Connect with her on Twitter or via email: nicole.jao.iting@gmail.com.

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