Ant Group's IPO sparked a dispute among investors over the world's largest ever stock sale and helped raise the total amount donated to nearly $ 37 billion.
The Chinese payments group's double IPO in Shanghai and Hong Kong has sparked tremendous demand from institutional funds keen to participate in one of the hottest deals in the world, as well as retailers willing to take big leverage.
The Shanghai side of the bookbuild closed on Thursday and banks triggered a greenshoe option to increase the offer after record retail bids of Rmb 19.1 billion ($ 2.8 billion) canceled the stock offering had exceeded more than 870 times. The expanded deal valued the company at around $ 316 billion.
Hong Kong institutional book construction was completed Wednesday, a day ahead of schedule, due to demand for bumpers, according to one knowledgeable person. The retail allotment for this stage is expected to be completed on Friday. Another greenshoe option on this side of the deal could add up to a grand total of $ 39.6 billion.
I don't really know what the ant group is doing. . . However, you will always win when you subscribe to new stocks
One of those investors who are struggling to secure their preferred allocation is GIC. The Singapore sovereign wealth fund believes it will only have to settle for a fraction of the $ 1 billion in Ant shares it wants when it goes public, according to two people familiar with the matter.
The deal sparked a frenzy among private investors. Some in Hong Kong are willing to borrow huge sums of money to secure stocks, and the brokers are happy to do so.
"We will provide around HKD 35 to 40 billion ($ 4.5 billion to $ 5.8 billion) for margin funding, or even up to HKD 50 billion if demand is high," said Edmond Hui, general manager of Bright Smart Securities. a Hong Kong broker lends punters 20 times their amount. By using such a high level of leverage, equity investments can be subject to spectacular gains and losses with relatively small movements in the stock price.
A Bright Smart spokeswoman said she provided HK $ 25 billion in margin financing on Tuesday's first day of sales. She added that some clients "had asked all of their family members to sign up to increase their chances".
"If you don't use leverage or margin financing, you may not be able to get stocks," said Kenny Wen, asset management strategist at Everbright Sun Hung Kai. He added that retail investors may need to invest at least $ 129,000 in order to secure a "good amount" of Ant stock.
Some are willing to put significant sums of money into Ant stock even though they don't know what the company is doing. Lee Wing-chun, a retiree in his 70s, wants to borrow HK $ 90,000 to use his HK $ 10,000 investment. “I don't really know what the Ant Group is doing. . . But you will always win when you subscribe to new stocks, ”he said. "I almost never lost any money."
Ant has been scrutinized in mainland China because it gives retail investors access to the Shanghai portion of its stock sales through an exclusive agreement with five mutual funds through its own app.
Another explanation for the fact that demand exceeds supply is the decision by Alibaba, the Chinese internet group from which Ant was spun off, to subscribe around 44 percent of the Shanghai IPO through a corporate unit.
The move, which increases Alibaba's stake to around a third of Ant, limits the allocation available to other investors. "You don't want to lose control," said Richard Harris, executive director of Hong Kong-based Port Shelter Investment Management.
Limiting the number of stocks that are available to outside investors can also help ensure an impressive spike in the Ant stock price on day one, as investors are barred from going public for stocks in the secondary market.
There is "less supply in the public float and more upward pressure on price," said a Hong Kong-based broker.
Ant Group declined to comment.