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China’s Ant Group set to raise more than $34bn in record IPO

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Ant Group is set to raise more than $34bn after setting the price of shares in its initial public offering, putting the Chinese payments group on track to top Saudi Aramco as the biggest ever market listing.

The financial technology company, controlled by Alibaba’s billionaire founder Jack Ma, will sell shares in a dual listing across Shanghai and Hong Kong. It is expected to make its market debut on November 5.

Ant said it would sell shares for the Shanghai portion, which will trade on the technology-focused Star market, at Rmb68.80 ($10.26) each, according to documents published by the city’s stock exchange on Monday evening. Ant also said it had set the price for its Hong Kong shares at HK$80 (US$10.32).

Together the sale of the roughly 3.34bn shares, which account for 11 per cent of Ant’s total outstanding stock, will fetch $34.4bn. The Shanghai segment alone will bring in Rmb114.9bn ($17.2bn) or more than double the Rmb53bn raised by chipmaker SMIC in July.

The pricings for both share offerings value Ant at about $313bn, roughly on equal footing with Wall Street bank JPMorgan Chase. The Chinese company’s valuation could rise to almost $320bn if underwriters on both portions exercise an option to sell additional shares that could bring total funds raised to $39.6bn.

“It’s been a good year for IPOs [in Asia] but this one is hard to miss and I think everyone feels it’s going to do well in the after-market,” said Philippe Espinasse, a Hong Kong-based investment banking consultant, referring to Ant’s potential share price performance after it begins trading.

Ant’s shares will be split evenly between Hong Kong and Shanghai. The share prices of companies that trade on both exchanges frequently diverge, with those in Shanghai often attracting higher valuations.

China’s CSI 300 of Shanghai and Shenzhen-listed stocks has rallied about 15 per cent in 2020, outperforming most big global benchmarks, on investor optimism over the country’s economic recovery from coronavirus. Hong Kong’s Hang Seng is down 12 per cent.

Chinese tech groups, including NetEase and JD.com, have raised billions of dollars via secondary share offerings in Hong Kong this year against a backdrop of rising tensions between Beijing and Washington.

The Trump administration has proposed legislation that could force Chinese companies to delist from US markets if they refuse to provide American regulators with access to their audit reports.



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Fintech Wise in talks with regulators over direct UK listing

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Wise, the fintech formerly known as TransferWise, is in discussions with British financial regulators about going public via a direct listing, in what would be a landmark deal for the UK market.

Wise is aiming to list in June and has been discussing the mechanics of a direct listing with the Financial Conduct Authority, according to people close to the company.

One of the people said the timing and structure of the deal were not yet finalised, but that the company had settled on a direct listing in London as its preferred route, after it hired banks to explore various options for going public last year.

The decision will be a boost for the London stock market and ministers after the high profile flop of Deliveroo’s initial public offering at the end of last month.

The UK government has been keen to attract more fast-growing tech businesses, with a review led by former EU financial services commissioner, Jonathan Hill, calling for a range of reforms to loosen listing rules.

Unlike Deliveroo, which has no operations in the US, and Darktrace whose shareholder Mike Lynch is fighting extradition to the US on fraud charges, investors say Wise could have been more easily attracted to a New York listing given its international leadership, global customer base and cross-border platform.

TransferWise was launched by Estonian duo Kristo Kaarmann and Taavet Hinrikus in 2011, offering low-cost international money transfers for retail customers, but has recently focused on attracting business clients and moving into more sophisticated banking services. It was renamed Wise in February in an effort to highlight the shift beyond simple money transfers.

The company reported revenues of £303m and pre-tax profit of £20.4m in the 12 months to March 2020, the most recent year for which data are available, and it has previously said that profits continued to grow through 2020.

Wise was most recently valued at $5bn in a secondary sale last July — equivalent to around £3.9bn at the time of the deal or £3.6bn at current exchange rates. However, shares in many payments companies have surged over the past year, and one existing investor said they were hoping for a valuation as high as $10bn.

Direct listings allow existing investors to sell shares and provide a relatively cheap way for companies to join the stock market without raising any new capital. They have become increasingly popular in the US in recent years, following high profile listings by tech companies such as Spotify, Slack and Roblox.

In an interview with the Financial Times late last year, Wise chief financial officer Matt Briers said “the traditional IPO has been a pretty boring or stale product for a while”. He added that “the direct listings space is quite interesting”, but stressed there had only been a few successful examples.

The FCA said: “We do not comment on individual cases but we assess all listing applications carefully and constructively with the applicant in line with a strict set of eligibility criteria. This is to ensure they meet the required listing standards and to avoid investor harm.”

The regulator said in its submission to the Hill review this year that “consideration should be given to ensure the UK regime is flexible enough to ensure these routes to market are available to companies in London as well.”

The London Stock Exchange has a long precedent of allowing companies to be “introduced” without raising capital, but Wise would be the largest company to do so without already being listed in another market or being separated from an existing business since Old Mutual, the investment group, in 1999.

Wise declined to comment.



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AppLovin adds to IPO boom

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The IPOs keep coming. After Coinbase’s successful direct-listing debut on the Nasdaq on Wednesday — it closed at $328, well above its reference price of $250, to be worth a fully diluted $86bn — mobile games group AppLovin has just raised $1.8bn to be worth $28.6bn.

The owner of hits such as Matchington Mansion and Wordscapes priced its shares at $80 ahead of its listing on the same exchange today, giving it a market value many times higher than the $2bn at which private equity group KKR purchased a $400m stake three years ago.

Several other gaming companies rushed to tap public markets after the pandemic brought them a windfall of users. The Roblox gaming platform joined the New York Stock Exchange last month and Israeli mobile game developer Playtika listed on Nasdaq in January.

They were part of a rush to market in the first quarter, where 398 US companies had IPOs, up from just 37 last year. Three-quarters were special purpose acquisition companies. Even excluding the Spac frenzy, the first quarter eclipsed the past five years, says Lex. This does not include direct listings of Roblox and Coinbase either.

The listing mania has allowed VC firms such as Sequoia and Andreessen Horowitz to cash out and gather more funding firepower to compete in a market of rapidly rising valuations for earlier stage companies.

Last year, 121 companies joined the elite group of start-ups valued at $1bn or more, according to CB Insights data. In the first three months of 2021, 78 companies hit the same target. Around the world there are now more than 600 such unicorns, led by China’s ByteDance, and the first quarter set a new record for global venture funding, with $125bn raised around the world, according to data from Crunchbase. 

Lex: US first-quarter IPOs

The Internet of (Five) Things

1. Deliveroo orders double under lockdown
Deliveroo said its order volumes more than doubled to 71m in the first quarter of 2021, with customer numbers also increasing sharply, as chief executive Will Shu admitted he had “a lot of work ahead” to win over investors after the UK food delivery service’s disastrous initial public offering.

2. TSMC ups sales forecast amid chip shortages
Taiwan Semiconductor Manufacturing Company, the world’s biggest contract chipmaker, expects 20 per cent revenue growth this year, up from a mid-teens forecast in January, as it continues to try to meet demand caused by a worldwide shortage of semiconductors.

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3. Dell boosted by VMware dividend
Dell shares are touching $100 today, up 8 per cent, after the US computer maker said it would receive a cash dividend of nearly $10bn in connection with the spin-off of its stake in VMware, easing pressure on its balance sheet.

4. Darktrace Lynch mystery
Darktrace has issued contradictory information about the role of British tech billionaire Mike Lynch, who has been charged with fraud in the US, complicating the cyber security company’s efforts to distance itself from the Autonomy founder ahead of its potential £3bn float. In 2018, Darktrace told the FT that Lynch had left its advisory council the previous year. But the company’s stock market registration document published this week says he remained on the body until March 2021.

5. How Jack Ma fell foul of Xi Jinping 
China’s most outspoken billionaire has gone silent. Since Chinese president Xi Jinping unexpectedly called off the blockbuster public offering of Ant Group, Jack Ma’s payments and lending business, five months ago, the Alibaba founder has made a single public appearance. Here’s our FT Magazine piece on how he fell from grace.

Sifted — the week in European start-ups

Sustainability is the latest buzzword among European start-ups. Venture capitalists are increasingly interested in measuring the ‘impact’ of their investments, while companies are ever more keen to show how ‘green’ they are to win over customers. This week, an €87m climate tech venture capital fund closed, a new ethical investment app launched and Sifted took a look at what, exactly, a head of sustainability does. 

Also this week, Sifted examined which fintech businesses might soon reach a $1bn valuation and columnist Nicolas Colin argued that if the Greensill debacle and Deliveroo’s recent doldrums teach the start-up community anything, perhaps it’s that they need to learn how to lobby.

Tech tools — Musion’s holographic pizza

Even going out on my first real-world assignment in more than a year today, there was still a virtual, remote element to the venue I visited on London’s South Bank. Virgin Media had connected their gigabit broadband service to a temporary pizza restaurant by the Thames, fitted out with equipment to create a hologram dining experience shared with a twin restaurant in Edinburgh. On the other side of the table to me in Scotland was the very realistic and contoured figure of Ian O’Connell, a director at the 3D holographic tech company Musion.

Its tech deployed an array of professional cameras and lighting to create life-size 4K holograms of the two of us against Vantablack panelled walls rather than conventional green screens. While this would have been a boon during lockdown, bringing loved ones closer together in hospitals and care homes, Ian told me the pandemic has helped to hasten development and such rooms could move beyond the trial stage to be appearing in businesses in 18 months’ time.

A pilot project for PwC has been created in Cyprus with the equipment costing around £140,000, but substituting TV broadcast standard cameras with cheaper ones could reduce the price considerably. The Two Hearts Pizzeria is connecting more than 30 loved ones in London and Edinburgh today and Friday. The rest of us will have to wait a little longer for the mystic pizza 3D-meeting experience.



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Mobile games group AppLovin valued at $28.6bn in IPO

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AppLovin, the mobile games company that owns hits such as a Matchington Mansion and Wordscapes, has raised $1.8bn in an initial public offering, giving it a market capitalisation of $28.6bn and making it one of the biggest public debuts of the year.

The company, backed by private equity group KKR, has established itself as one of the power players in mobile gaming in part through numerous acquisitions and has benefited from a boom in usage during the pandemic.

It owns and operates more than 200 games itself and also sells access to its marketing software to other developers, making it easier for them to monetise their apps.

The company priced its shares at $80 ahead of its listing on the Nasdaq on Thursday, according to the regulatory filing, the midpoint of its previously set range of $75 to $85. The issue price gives it a market value many times higher than the $2bn at which KKR purchased a $400m stake three years ago.

The private equity group was selling 2.5m shares in the offering, according to the regulatory filing, but was keeping a stake worth $8.6bn. KKR will also retain 67.4 per cent of the company’s voting power.

AppLovin said its revenue reached $1.45bn last year, up 46 per cent on 2019, although it lost $126m compared to net income of $119m the previous year. In its prospectus, AppLovin said it had compounded annual revenue growth from 2016 to 2020 of 76 per cent.

Several other gaming companies rushed to tap public markets after the pandemic brought them a windfall of new users and despite uncertainty over their prospects as many countries lift restrictions on in-person activities. Pre-teen favourite Roblox joined the New York Stock Exchange last month, and Israeli mobile game developer Playtika listed on Nasdaq in January.

On top of an anticipated slowdown in growth, the industry also faces headwinds from tighter advertising and privacy rules that Apple is scheduled to integrate into its app store in the coming months.

Those changes represented “the biggest challenge” for the mobile gaming industry at the moment, said Craig Chapple, a strategist with research group Sensor Tower, but he said AppLovin might be better positioned to manage them because of its dual revenue stream from operating games and selling its development tools to others.

Morgan Stanley, JPMorgan, KKR, Bank of America and Citigroup led the offering.



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