The number is about a third above Ant’s valuation after its last fundraising in 2018 when it emerged as the world’s most-valuable unlisted tech firm, yet is far below the $315 billion it touted for what was set to be the world’s largest IPO.
Investor hopes for a huge windfall crashed when regulatory scrutiny scuppered the $37 billion initial public offering (IPO) days ahead of Ant’s November listing. Regulator-mandated restructuring as a financial rather than tech firm has since made some more conservative with their analysis as the former typically carry lower valuations, sources and analysts said.
Ant’s business as of the October-December quarter was little affected by regulatory scrutiny, an investor said. Still, the Alibaba Group Holding Ltd affiliate’s revised valuation and listing timeline must wait until it finalises a revamp plan.
Investors’ revised estimates of Ant’s valuation, which will determine their returns, are reported here for the first time.
Warburg Pincus LLC valued Ant at about $220 billion at year-end based on 2020 earnings and comparable company analysis, said two of the people. Early last year, the US private equity firm sold part of its stake for $90 million at a $190 billion valuation in a private trade, other sources said.
Another investor said its estimate, based on Ant’s latest financial figures, was not very different from that of Warburg.
The people declined to be identified due to confidentiality constraints. Warburg and Ant declined to comment.
RESTRUCTURING
Ant is changing its corporate structure to that of a financial holding firm following regulatory pressure to subject it to rules similar to those for banks.
The Hangzhou-based financial technology giant was regarded as a tech firm in 2018 when it raised $14 billion at a valuation of about $150 billion in the world’s largest single fundraising.
Investors included private equity firms Warburg, Carlyle Group Inc, General Atlantic and Silver Lake Partners LP, plus Singapore sovereign wealth fund GIC Pte Ltd and existing shareholders Boyu Capital and Primavera Capital Group.
At its IPO pricing, Ant’s valuation soared to about $315 billion, or over 31 times its forecast 2021 net profit.
With the earnings impact of the revamp unknown, one investor said it valued Ant at about the same as the 2018 fundraising. Another said it marked its Ant investment at cost, meaning it does not see any return for the time being.
REDEMPTION
It is unclear if and how global investors in particular will be able to monetise their investment. Those who joined the 2018 fundraising have few exit options under pacts highly favourable to Ant, said separate people with knowledge of the matter.
International investors in the $10.3 billion US dollar tranche of the 2018 fundraising invested in offshore unit Ant International and hold so-called Class C shares that do not carry voting rights, according to Ant’s IPO prospectus. None were granted a seat on Ant’s board, the prospectus showed.
Investing in a subsidiary instead of the company itself is unusual for such large investments. Chinese rules meant Ant had to be domestically incorporated to more easily obtain a licence for payment arm Alipay, restricting its ability to raise capital directly offshore.
Global investors are entitled to a 15% internal rate of return, the annual rate of growth an investment is expected to generate should the firm implement a redemption scheme in lieu of an IPO, showed an Ant fundraising document seen by Reuters.
As the Class C shares played no part in the suspension of the IPO, however, Ant is unlikely to offer international investors any form of redemption, said three of the people.
Ant also did not state in its fundraising document a date by which it would conduct any redemption scheme, indicating investors might have to hold their stakes for an indefinite period should the listing not happen. Any private share sale by them would also need Ant’s consent, the people said.
