Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

China’s Ant Group, about to make the biggest public sale of shares ever, poses a basic conundrum: what kind of company is it - a financial colossus or a tech giant?

That is important for investors before and after the initial public offering of $34.4 billion, surpassing Saudi Aramco’s record $29.4 billion float last year. Shares are expected to start trading on Thursday in Shanghai and Hong Kong.

A spinoff from billionaire Jack Ma’s Alibaba Group, Ant presents itself as a technology company, while financial regulators suggest the firm remains under their purview.

Story continues below advertisement

The Hangzhou-based giant benefits from the far richer valuations the market affords to tech firms than to financial institutions. It hopes to escape the closer scrutiny of financial regulators, analysts say.

China’s central bank and financial regulators met on Monday with Ma and top Ant executives as Beijing published draft rules for online micro-lending.

One rule would require firms like Ant to shoulder default risks together with banks, while limiting leverage and lending amounts - all approaches used to regulate banks. An Ant spokeswoman said the company would “implement the meeting opinions in depth”.

Ant launched in 2004 as Alibaba’s payments processor. Its core Alipay app has more than 730 million monthly users in China.

It has also built an empire connecting China’s borrowers and lenders, securing short-term loans within minutes. It has branched out, using artificial intelligence and other sophisticated techniques to facilitate not just payments and loans but products from insurance to wealth management.

This means, Ant says, it is chiefly a technology vendor for financial institutions. Ma has called it a “techfin” rather than a “fintech” outfit.

Sceptics find this argument unconvincing. They say financial regulators are unlikely to turn down the heat on a company that only this year changed its name from Ant Financial.

Story continues below advertisement

Ant Group declined to comment for this article.


Tech teams, not finance bankers, at most of Ant’s underwriter banks are leading the IPO, people with knowledge of the matter told Reuters. They have secured tech-style pricing.

The dual listing values Ant at $312 billion, or 31.4 times its forecast 2021 net profit, in the same ballpark as Alibaba, trading at 27.6 times forward earnings and New York-listed peer PayPal at a 45 multiple.

Some investors think Ant should be valued at up to $400 billion or more in the IPO, two sources said.

Compare that with, say, Industrial and Commercial Bank of China, the world’s biggest bank by assets, at a multiple around 6.

Two or three years ago, Ant began its fin-to-tech shift as Chinese regulators heightened scrutiny to control financial risks in the system. Last year the company for the first time made most of its revenue from fees generated by its digital finance technology platform.

Story continues below advertisement

Ant executives regularly stress that technology is in the firm’s DNA. “Since our inception over 16 years ago, digital technology has been part and parcel of everything we do,” CEO Simon Hu said recently.

More than 60% of Ant’s employees are engineers and programmers, its prospectus says. It provides high-tech risk analysis but leaves lending decisions to the banks, two sources said. And unlike banks, which traditionally rely on collateral to determine creditworthiness, Ant’s risk-modelling algorithms leverage data it has collected, analysts say.

Patriarch Ma, who has propelled the shift to a tech identity, recently called financial regulation outdated, badly suited to companies trying to use technology to drive financial innovation.


But China’s financial regulators are only growing warier about financial technology. They consider Ant’s business model of matching borrowers and lenders mainly a financial service.

Ma’s remarks on regulators point to a deep conflict between fintech development and financial regulation, said Ji Shaofeng, a former official at the China Banking and Insurance Regulatory Commission.

“Although Ant is trying to phase out of its financial identity and emphasise itself as a digital technology firm, the dominant part of its revenue, which comes from its credit business, and its high leverage ratio have always attracted the wide notice of both regulators and the capital markets,” Ji wrote in a column for the financial news outlet Caixin.

Story continues below advertisement

Ant’s most lucrative business, consumer credit, is based on interest income. The firm takes an average 30%-40% cut of the interest on loans it facilitates, analysts estimate.

“That’s why the profit written in Ant’s prospectus is so lucrative, even more lucrative than banks,” one source said. “Business-wise, you can see Ant as the interbank counterpart of all the lenders.”

Vice Finance Minister Zou Jiayi told a recent conference, which Ma attended, that fintech must not be allowed to dodge regulation, conduct illegal arbitrage and bolster a winner-take-all style of monopoly.

“Fintech has not changed the nature of finance that relies on credit and uses leverage,” she said.

China’s cabinet-level Financial Stability and Development Committee, in a Sunday statement widely seen as responding to the debate over Ant’s nature, said, “Innovation and entrepreneurship should be encouraged, but at the same time we need to strengthen supervision and include all financial activities into the regulatory framework by law.”

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies