Ride-hailing giant Grab is full of surprises these days. It was not so long ago that the Singaporean decacorn was said to be considering a tie-up with its rival Gojek. Gojek instead is moving to merge with e-commerce giant Tokopedia while Grab is taking the SPAC merger road to an exit. The forthcoming Nasdaq SPAC could value Grab at up to US$40 billion, but it is not the only listing the company is considering. Indeed, Grab is also considering a secondary listing on the Singapore Exchange (SGX).
It has not been the best six months for Ant Group. The erstwhile high-flying fintech giant landed squarely in regulatory crosshairs on the eve of its abortive IPO and has been there ever since. Initial optimism that the company could expeditiously get its regulatory house in order have been dashed as Beijing’s demands increase. Not only must Ant vastly increase its capitalization, which will eat deep into its profit margins, the company must also restructure and hand over its precious user data to a state-run firm. Ant's valuation could fall as low as US$29 billion, a far cry from the US$315 billion price tag that the company had around the time of its abortive IPO. These changes will have a profound impact on Ant’s future prospects and likely other major fintechs in its ecosystem as well.
Buy now, pay later may be the greatest thing for payments since well, credit cards, or even better, depending whom you ask. “What we’re seeing now is a once-in-a-lifetime generational shift away from traditional credit products,” Afterpay CEO and co-founder Anthony Eisen recently told The Australian. While the concept of zero-interest installment payments is not exactly revolutionary, Afterpay is one of the fintechs that has figured out how to package it right. As a result, Afterpay is not only one of the biggest BNPL firms in Australia but also the US. In March, Afterpay surpassed AU$1 billion in monthly sales in the US. With the US increasingly driving Afterpay’s growth, the company is considering an IPO on the Nasdaq.
After years of raising funds in private markets, Southeast Asia’s largest platform companies are suddenly eager to exit. The region’s foremost super app rivals are leading the pack, but the exit routes vary considerably. Grab is making SPAC history with the largest ever such deal, on the Nasdaq. Not to be outdone, Gojek and Tokopedia are moving to finalize their expected merger, which will likely include a listing both in New York and on Indonesia’s own stock exchange. The combined entity, the aptly named “GoTo,” could attain a valuation of US$30-$40 billion.
Grab is heading for the exit ramp SPAC style. IPOs are slow, costly and let regulators hold a magnifying glass to a firm’s balance sheet. Less so with this SPAC on the Nasdaq, which will give Grab a high valuation (US$40 billion) and investors a way to cash out. Grab has been operating for about nine years. The merger will include roughly US$4.5 billion in cash, the largest share sale yet by a Southeast Asian firm in the U.S.
Before Ant Group’s IPO was nixed, the Shanghai STAR board was red hot. Since then, it has cooled off considerably. Not only is Ant’s IPO in limbo, but other Chinese tech companies are scuttling their plans to go public, one after the next. Ant is the bellwether for the market, whether it is a bull or bear. Data compiled by Financial Times show that 76 firms suspended their IPO applications in March, more than twice the number in February. Overall, 168 companies have put their plans to go public on ice since November.
Hong Kong's IPO market picked up in the first quarter right where left off in 2020, soaring to a new high in terms of overall proceeds, according to KPMG. Deals raised on the Hong Kong Stock Exchange totaled US$13.9 billion. The nixed Ant Group deal last October has sidelined most fintech listings but not the rest of what KPMG describes as "innovation companies," notably biotechs.
Heading into 2021, Indonesia's prospects for fintech investment were looking pretty good. Among Asia's key emerging markets, Indonesia checks all the right boxes. It is huge, relatively open to foreign investment, has a fast-growing economy (hindered by the pandemic for now, but certain to rebound sharply) and has a large unbanked population. With most Indonesians new to retail investing, fintechs see a strong opportunity to get in on the ground floor. Since January, several Indonesian online investing startups have closed successful funding rounds.
After umpteen funding rounds and nearly nine years in operation, Grab is finally heading for the exit ramp. The question is, will the Singaporean decacorn choose to go public the usual way or do something different? Until the past few weeks, a standard IPO in New York looked like the obvious choice. But with the current SPAC (special purpose acquisition company) craze, Grab might decide to hop on the bandwagon.
To delist or not to delist: That is the question. The New York Stock Exchange (NYSE) could not seem to make up its mind earlier this month, delisting three Chinese state-owned telecoms stocks (China Mobile, China Telecom and China Unicom Hong Kong), reversing course, and then finally deciding that the three firms should be delisted after all. The professed reason for kicking the companies off the NYSE is they have ties Chinese military and threaten America's national security. The impact on their market capitalization will likely be limited as their trading volume is much higher in Hong Kong than New York. More forced delistings of Chinese firms could occur in the waning days of the Trump administration though.
Hong Kong's IPO market has been almost unstoppable in 2020. Neither the worst pandemic in a century nor the nixing of Ant Group's long-anticipated blockbuster debut have been able to dampen market sentiment for long. To be sure, fintechs have shelved plans to list in Hong Kong, but there are many other Chinese companies unaffected by the microlending crackdown eager to go public in the former British colony. In fact, while the fintech unit of JD.com will likely delay its listing indefinitely, JD's health unit is set to raise US$3.5 billion.
The suspension of Ant Group's blockbuster IPO has cast a shadow over China's fintech industry as online microlenders scurry to figure out how to meet tough new capitalization requirements. JD Digits, the fintech unit of e-commerce giant JD.com, is one of the firms most affected by the nixed Ant IPO. JD Digits filed in September to list on the Shanghai STAR board, a deal that was expected to raise up to US$3 billion.
With the suspension of Ant Group's IPO, Beijing is once again signaling that its patience for fintech-induced disruption has limits. In the past, Chinese regulators throttled entire fintech industry segments - cryptocurrency and P2P lending - that they deemed excessively risky to the financial system and a threat to social stability. To be sure, Ant Group plays an integral (some would say peerless) role in the Chinese financial system which makes it very different from P2P lenders and crypto firms. However, Beijing places a premium on controlling systemic financial risk. No company can expect the enthusiastic backing of regulators if it appears too gung-ho about disruption and somewhat contemptuous of the system. China officially remains a socialist market economy, lest fintechs or their investors forget.
Hong Kong's future as a financial center is increasingly centered on mainland China. That's a boon for the city's capital markets, among the world's best performing in a difficult year. From January to July, Hong Kong IPOs raised US$87.5 billion, up 22% year-on-year, buoyed by a flurry of Chinese tech and biotech listings. While that tally is impressive, the best is yet to come. Ant Group's dual-listing IPO in Hong Kong and Shanghai is expected to raise US$35 billion, half in each city. The IPO is likely to occur before the U.S. presidential election on November 3 to eschew possible market volatility.
India's Paytm hopes to follow in the footsteps of its key backer Ant Group and build a super app centered on financial services. In a market as large, diverse and fragmented as India's, it is unlikely any app could become a dominant as Alipay and WeChat are in China. However, "super" need not mean the app for everything, maybe just for most of one's digital banking needs. That's why Paytm is steadily adding new services. The latest one is stock trading, a fast-growing business in India.
Amid clouds of a U.S.-China financial war, Hong Kong is fast becoming the default for Chinese fintech IPOs. The former British colony offers liquid capital markets both close to both home and global investors. But there are exceptions. Lufax, one of China's largest online wealth management platforms, is reportedly instead eyeing a New York IPO that could raise up to US$3 billion. If Lufax moves fast, it can list in the U.S. before new rules go into effect that may prevent Chinese firms non-compliant with American accounting standards from listing on U.S. exchanges.
Shanghai's STAR board is introducing a more market-driven approach to China's initial public offerings. Listing on the STAR market is more streamlined than the traditional process in China, where new listings are subject to an informal price cap of 23 times earnings and a 44% ceiling for first-day gains. Before the Shanghai STAR Board was launched it July 2019, it could take many years before companies' plans to go public were approved. Now a flurry of tech listings on the Shanghai STAR market are shaking up China's capital markets.
For the IPO of China's fintech giant Ant Group, two listings are better than one. Instead of going public only on the Hong Kong Stock Exchange or the Shanghai STAR Market, Ant plans to list on both. Ant has not disclosed the size of its coming IPO, but the firm is reportedly valued at US$200 billion, up from US$150 billion during its 2018 fundraising. Ant reportedly plans to sell 10% of its shares through the twin listing, which could come this year or in 2021. An uncertain market outlook will inevitably weigh on timing.
The Hong Kong IPO market's hot streak shows no sign of slowing down, despite political turmoil and the pandemic-induced downturn. The reason is simple: Whatever changes come in Hong Kong, Chinese firms are prepared for them. After all, the firms listing on the HKEX are all based on the mainland. At the same time, China's economy is gradually recovering. Business activity is picking up.
Investors appear to have adjusted to a new normal in Hong Kong, one characterized by political unrest and economic uncertainty. As the coronavirus ebbs, protests are returning to Asia's preeminent financial hub. The former British colony remains mired in a steep recession. And yet, large Chinese tech firms are pushing ahead with initial public offerings and secondary share listings on the Hong Kong Stock Exchange. At the current rate, Hong Kong could be the world's hottest IPO market in 2020.
As tensions between the U.S. and China flare up in the financial sector, the future of Chinese fundraising in America's capital markets looks uncertain. Hong Kong has benefited, attracting a growing number of Chinese tech IPOs and secondary share listings from juggernauts like Alibaba and JD.com. Another possible winner in the U.S.-China financial tussle could be London, which began operating the London-Shanghai Stock Connect scheme in 2019.
The past year has been one of the hardest in memory for Hong Kong, which has been in recession since the fourth quarter of 2019. While the city has contained the coronavirus relatively well, it still faces political turmoil with no end in sight. You wouldn't know that from the state of its IPO market though, which had the most new listings among all stock exchanges in the first quarter and is gathering momentum faster in the second quarter than any other major index.
The Hong Kong IPO market has picked up considerably since early May. Suzhou-based biotech firm Peijia Medical listed on the HKEX on May 15, raising HK$2.3 billion (US$302 million) that it will use to develop its product pipeline of heart valve and vascular repair devices. Peijia Medical's shares jumped 74% in its first day of trading, the best debut performance this year so far for an IPO over US$50 million.
Hong Kong's future as a financial center is increasingly clear: It will be a global fundraising hub for Chinese firms, especially in the technology sector. These days, the biggest Hong Kong IPOs are almost all Chinese tech firms, whether the listings are primary or secondary. Non-Chinese tech firms are more likely to go public in New York or London. Following Alibaba's mammoth secondary share listing on the Hong Kong Stock Exchange in November 2019 - which raised US$13 billion - its arch-rival JD.com is reportedly planning a $US3 billion share sale in Hong Kong this year. Alibaba's primary listing is on the NYSE while JD.com is listed on the Nasdaq.
In early April, China's Starbucks rival Luckin Coffee was revealed to be a paper tiger. The company that was supposedly giving the U.S. coffee giant a run for its money in the world's largest consumer market had literally fabricated its success. To be sure, Luckin's 4,500 China stores - exceeding Starbucks' 4292 - were no mirage. But the company's sales figures were bogus. On April 2, Luckin publicized the results of an internal investigation showing RMB2.2 billion (US $311 million) in fraudulent sales from the second to the fourth quarter of 2019.
Hong Kong's IPO market was expected to be one of the world's best performing this year, attracting Chinese firms eager to raise capital internationally. Whereas such firms may have preferred listing on the NYSE or Nasdaq in years past, tensions in the U.S.-China relationship have caused many of them to reconsider.
Then the novel coronavirus broke out, sapping the steady momentum that had been building in Hong Kong's capital markets since Alibaba's mammoth secondary share listing in November 2019. Artificial intelligence startup SenseTime is the latest major Chinese tech firm to put off a planned Hong Kong IPO this year. SenseTime will instead seek up to US$1 billion in private funding.
Chinese fintech giant Ant Financial is reportedly working with banks to restart a long-stalled initial public offering. In its most recent fundraising round, held in June 2018, Ant was valued at US$150 billion. With a price tag like that, when Ant does go public, the listing will be pathbreaking for Asian companies. The company has not given a timetable for the IPO, but Credit Suisse and China International Corp. are involved in initial preparations, according to The Financial Times.
Hong Kong's IPO hot streak is expected to continue this year with the former British colony among the world's top three markets for initial public offerings, according to PricewaterhouseCoopers (PWC). PwC expects up to 180 companies to raise as much as HK$260 billion (US$33.4 billion) on the Hong Kong Stock Exchange.
While sufficient to place Hong Kong among the world's three top IPO markets, that amount would still mark a decline of almost 18% from 2019's HK$315.5 billion, which was No. 1 globally. Alibaba's mammoth secondary share listing of HK$100 billion (US$12.9 billion) accounted for almost 40% of the total last year.
Alibaba's secondary share listing in Hong Kong is back on track and now set for late November. The Chinese e-commerce giant eschewed Hong Kong for New York when it first went public in 2014, to the disapproval of some in Chinese officialdom. The Hangzhou-based company has been planning a secondary listing in Hong Kong to fund large-scale expansion plans. Those plans were put on hold amidst the worst political instability to hit Hong Kong since the late 1960s.
While the protests have yet to abate, Alibaba is ready to go ahead with its Hong Kong IPO anyway, with a probable date of November 26. The IPO is expected to raise up to $13.4 billion, analysts say. A draft prospectus reviewed by Reuters shows that Alibaba plans to use the money to invest in e-travel group Fliggy, Ele.me, an online delivery and local services platform, and YouKu, a Chinese variation of YouTube.
Hong Kong has had a tough year. Following more than four months of protests, the city's economy slipped into recession for the first time in a decade in the third quarter, contracting 3.2% in the July-September period compared to the quarter ended June 2019. The political instability shows no signs of easing either.
Yet, Hong Kong has led the world in initial public offerings since early September. Data compiled by Bloomberg show first-time share sales on the Hong Kong Stock Exchange are US$7.9 billion since September 1, ahead of the Nasdaq's US$7 billion and the New York Stock Exchange's US$3 billion. Anheuser-Buschs's US$5.8 billion IPO of its Asian unit accounted for the lion's share of new Hong Kong listings.
Since its return to China in 1999, the former Portuguese colony of Macau has become the world's gambling capital, with a casino industry far larger than Las Vegas's. Macau's huge gaming sector has helped the territory maintain strong economic growth over the past two decades, even during the global financial crisis of 2008-09. However, reliance on gaming exposes Macau to an unusually high level of financial crime risk. Despite government efforts to tackle the problem, Macau remains at high risk for money laundering.
Given Macau's money laundering travails, it may come as a surprise that the territory has plans to launch a stock exchange. After all, strong regulatory compliance is a necessity for any city with ambitions to become a financial center. It goes hand in hand with the rule of law. Neither Hong Kong nor Singapore could have become financial centers without both of these attributes. Nevertheless, He Xiaojun, director of Guangdong Province's Financial Supervision and Management Authority, said in October that Macau had submitted a plan to set up an RMB-based stock exchange to the central government. There is hope that the stock exchange will become “the Nasdaq of the People’s Republic of China," he was quoted as saying by TDM Chinese Radio.
In a sign of increasing tensions between the U.S. and China in the financial sector, the Nasdaq is tightening scrutiny of small Chinese companies' IPOs. These firms usually raise most of their capital from Chinese investors rather than American ones. The shares of these companies tend to trade thinly once they've gone public, limiting their appeal to large institutional investors - on whose interests the Nasdaq focuses.
Recent reports in the U.S. media have described the Trump administration mulling a plan that would involve the delisting of Chinese firms from U.S. stock exchanges. The Trump administration has denied the reports, while political heavyweights such as Senate Majority Leader Mitch McConnell have dismissed the idea outright. McConnell told CNBC that the Treasury Department made clear it does not favor delisting Chinese firms from U.S. stock exchanges.
Alibaba's expected Hong Kong listing was supposed to be a grand homecoming. After all, the company's $21.8 billion 2014 NYSE listing - at the time the largest global IPO ever - disappointed some folks in Chinese officialdom who hoped China's biggest e-commerce firm would go public closer to home. Since the HKSE revised its rules last year to allow dual listings, there has been much speculation about Alibaba listing in Hong Kong.
In August, international media reported that Alibaba would suspend plans to list its shares in Hong Kong. The stock offering, which was expected to raise US$10-15 million had been scheduled for late August, according to a recent New York Times report. The deal could well have been the largest of the year and the top follow-on share sale in seven years. Alibaba nixed plans to list its shares in Hong Kong because of ongoing protests in the city and associated instability, the report said.
Can Shanghai’s new NASDAQ-style exchange really become a NASDAQ and can Shanghai become New York?