On the way to the largest IPO in the world: Jack...

In September 2014, the charismatic Chinese entrepreneur led the way Jack Ma Alibaba, the online trading company he set up 15 years earlier in his Hangzhou city apartment, for IPO in New York. The IPO was a kind of closing circle for Ma, who during a visit to the United States in 1995 was first exposed to the Internet, the tool that Alibaba would use to rise to greatness. Ma even coined the name Alibaba during a visit to the United States, checking it for the first time Francisco.

Alibaba’s IPO, in which the Chinese company raised $ 25 billion, has for years held the title of “largest IPO in history.” The title was taken from it just last year when Saudi oil company Aramco raised $ 29.4 billion on the local stock exchange. Even after the record loss, Alibaba’s IPO can certainly be considered a dizzying success, with the Chinese company’s $ 68 share price has since soared to more than $ 300 – a leap that many American investors have benefited greatly from.

Born in Alibaba

The New York Stock Exchange or NASDAQ were also supposed to be the natural place where Ma’s huge fintech project would be issued. Annette Group, Formerly known as Alifai, was born in late 2003 as an arm within retail giant Alibaba, before splitting into a separate company in 2011. It was originally a money transfer service between sellers and buyers on the Alibaba website, but over the years the business’s volume of activity has expanded to other financial areas, such as mobile payments in physical businesses and marketing investment routes and loans in partnership with Chinese banks.

Annette is currently the largest payment company in China, and in the 12 months leading up to June this year, it handled payments of $ 17 trillion, 24 times more than the amount that goes through the PayPal service per year. At the same time, about 500 million Chinese have taken out a loan through the app in the past year.

However, the continuing deterioration in US-China relations, the American attack on Chinese companies and applications such as Wavi and Tic Tac and the intention to impose stricter rules on the criticism of Chinese shares traded in the US, all led Mama to issue a dual issue on the Shanghai Star Stock Exchange. And on the Hong Kong Stock Exchange instead of in New York.

This choice of MA will cause the American stock exchanges to now miss the largest offering in history. In an IPO, which is expected to officially take place next Thursday, November 5, Annette Group is expected to raise at least $ 34.4 billion in an almost equal distribution between Shanghai and Hong Kong. The offering could even grow by another $ 5.2 billion if the underwriters exercised their right to sell another 15% of shares in an over-allotment (Greenshoe). Even without this procedure, the value of Annette Group in the offering will be $ 313 billion – higher than many of the world famous financial institutions.

The US will not only miss the global record issuance, it will be an even bigger miss for many American investors who will not be able to attend the celebration. These are mainly pension funds and American financial institutions, which are limited in investment policy and cannot buy shares in non-US companies.

Judging by the return recorded by Alibaba over the years, non-participation in the issue of Annette Group is certainly a serious miss for those American investors.

The problematic record of Chinese companies

Chinese stocks traded in the U.S. have a mixed record. Alongside successes like Alibaba, there have also been far less exhilarating affair. One of the most famous and painful of which is the Chinese coffee chain Lakin Coffee, which was issued on the NASDAQ last year and deleted from trading this year following its business results.

Such cases do point to the need to increase surveillance and supervision of Chinese companies traded in the US. Who moved to a place in New York.

Despite ups and downs in U.S.-China relations over the years, Chinese entrepreneurs have continued to see the U.S. IPO as the ultimate dream. Just as young Chinese talents dreamed of studying at prestigious U.S. universities and green cards, Chinese entrepreneurs dreamed of NASDAQ and the New York Stock Exchange.

An IPO in the US has also allowed Chinese companies more freedom in the use of foreign currency, an issue that is tightly controlled by the government in their country. Only things are changing rapidly now.

The US operates as a monopoly that holds access to the major financial exchanges in the world and can set the rules of the game for the rest of the world. But, Annette’s issuance reveals that a monopoly can also be broken.

The Annette issue gives a strong boost to the new Star Stock Exchange in Shanghai, the cultivation project conceived by President Xi Jinping. Star was established last year as an imitation of the American Nasdaq and did not take off in the beginning. The offering is also a further strengthening of the Hong Kong stock market, which has become the default for Chinese companies fleeing the US.

Jack Ma himself said last week at a forum in Shanghai that it is a “miracle” that such a large offering is taking place outside of New York; “It’s something we would not have dared to think about five years ago, or even three years ago,” Ma said.

The miracle is happening thanks to quite a bit of mobilization on the part of the Chinese government and Chinese institutional entities like the China Pension Fund and investors associated with Chinese government companies, insurance companies and banks that have flowed demand for an Annette Group IPO in Shanghai.

Alibaba, a former parent company of Annette Group, also announced that it would buy shares worth $ 7.6 billion to maintain a 33% stake in Annette. They were joined by many foreign buyers, such as the Canadian Pension Fund, the GIC Fund of the Singapore Government and the Singapore Corporation Tamsk. High demand for the stock on the Hong Kong Stock Exchange caused Lant to close the early sale a day ahead of schedule.

These peak demands came despite implicit American threats against the Chinese fintech company Annette.

In recent weeks it has been reported that the Trump administration is considering adding Annette Group to the blacklist, which will prevent American companies from doing any business with it without a special license.
Blacklisting can be a very painful blow to companies like Wawi, which relies on chips made in American equipment, but it is a less destructive move for a company like Annette Group, which does not rely at all on American technology and the vast majority of its business is concentrated in China. Aside from the U.S. miss of global record issuance, the Annette Group case also reveals to some extent the limitations of American power.