Ant's record strategic allocation in Shanghai IPO fuels small investor scramble

[SHANGHAI] Chinese fintech giant Ant Group's move to earmark a record 80 per cent of the Shanghai leg of its US$35 billion dual-listing for strategic investors has led to a scramble among smaller investors for what some see as a once-in-a-lifetime opportunity.

Ant, backed by e-commerce firm Alibaba Group, has launched a dual-listing process in Hong Kong and on Shanghai's STAR Market, and the offering is set to be the world's largest.

Some smaller Chinese investors, spooked by concerns they could get edged out of the initial public offering (IPO) at home, are looking to bid for Ant shares in the Hong Kong float, which sources have said will not include a cornerstone tranche.

The move underscores the likely robust demand for the float, even as the approaching US election has triggered concerns about a spike in market volatility.

Shanghai-based Regan Fund Management, for one, is helping mainland investors subscribe to Ant's IPO in Hong Kong, the firm's Shanghai-based general manager Richard Li said.

The chance of securing IPO shares in the Asian financial hub is 50-70 per cent, much higher than on the mainland, Mr Li told Reuters.

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Non-strategic or smaller investors in China participate in a lottery-like bidding process for IPOs, which means the fewer the number of new shares on offer the smaller the chance of winning the lucky draw.

"Everyone knows buying IPO shares makes good profits as most shares trade up on debut," said a banker working on Ant's STAR IPO, declining to be named as he was not allowed to speak about the process. "The demand has been rather strong for Ant shares."

Hong Kong-based brokerages are also taking advantage of the Ant IPO frenzy to woo mainland investors.

Huatai Financial Holdings is offering new clients from the mainland one Alibaba Hong Kong share if they open a brokerage account and deposit more than HK20,000 (S$3,502), according to an advertisement posted on an overseas investment platform in China.

Ant's earmarking of 80 per cent of the offering for strategic investors, including a unit of Alibaba, is sharply higher than an average proportion of 19 per cent for such buyers in other STAR IPOs this year, according to Refinitiv data.

Before Ant, China's biggest mobile payments company, the record of strategic tranche on STAR was set by chipmaker Semiconductor Manufacturing International, which in July sold 43 per cent of its US$7.6 billion secondary listing to strategic investors, the data showed.

On the Nasdaq-style STAR, the bulk of past IPO allocations have been skewed towards state investors, mutual fund houses and select hedge funds, elbowing out smaller institutions and individuals, most of whom are not even qualified to trade.

In another unprecedented move, some of Ant's strategic investors are subject to lock-up periods of longer than the one year that is typical, the company's filing with the Shanghai exchange showed.

REUTERS