KEY POINTS

  • Ant Group's IPO to raise at least $20 billion in IPO
  • Sponsor banks including JPMorgan, Citigroup, Morgan Stanley to get lion's share
  • Banks in Hong Kong get an average 1.45% commission for deals valued over $1B

Chinese fintech company Ant Group’s record-breaking initial public offering (IPO) on the Shanghai and Hong Kong markets will mint as much as $396 million in windfall profits for the Hong Kong banks working on the IPO.

In a filing, the company disclosed that it will pay an underwriting commission of as much as 1% of the total deal size, which is estimated to be close to $19.8 billion in Hong Kong. Data by Bloomberg suggests that Ant Group’s bankers are not getting the best share as historically, in deals of over $1 billion, banks in the city covet an average commission of 1.45%.

This percentage is yet to be decided in Ant Group’s case and will be finalized around Oct. 30, Bloomberg reported. Banks will also discuss how the fees will be divided among themselves but it is common practice for sponsors to take the bigger share, which in this case includes Citigroup, JPMorgan Chase, Morgan Stanley, and China International Capital.

Another blockbuster IPO in Hong Kong was the AIA Group’s, in 2010, valued at $20.4 billion, wherein banks involved were paid 1.75% commission, the report said. Budweiser Brewing Company APAC’s $5.75 billion lasting in 2019 earned the banks 1.5%.

Chinese e-commerce giant Alibaba, which holds a one-third stake in Ant, paid just 0.25% commission to banks in its $12.9 billion second listing in Hong Kong last year, well below the industry average. This could be because a company already listed on another exchange does not raise as much money as investors are already familiar with its operations.

NetEase, listed on Nasdaq first, went public on the Hong Kong exchange, paying only 0.25% to the banks.

Not just the banks but Jack Ma, co-founder of Alibaba, is set to become richer than members of the family that owns Walmart after the Ant IPO. Early investors and employees are also poised to get some of the fortunes from the blockbuster listing. Ant Group’s employees have been receiving stock-based rewards since 2014.

The company aims to raise at least $20 billion from the IPO, potentially more than the $29 billion Saudi Aramco raised in its IPO in December, to become the largest offering ever.

Ant Group runs Alipay, one of China's two dominant online payment systems Ant Group runs Alipay, one of China's two dominant online payment systems Photo: AFP / Hector RETAMAL