Jack Ma's Ant IPO fuels frenzy not seen since dot.com bubble

HONG KONG • Ant Group's potentially record-size initial public offering (IPO) could propel technology capital raising this year past the dizzying heights of the dot.com bubble, an extraordinary showing in a pandemic-stricken year fraught with geopolitical uncertainty.

Mr Jack Ma's Chinese financial titan aims to raise at least US$30 billion (S$41 billion) in Hong Kong and Shanghai next month, which could push global first-time share sales by tech firms well past US$57 billion, according to Bloomberg.

That would be the highest since 1999, when tech companies raised US$62 billion and famously ushered in a plethora of now-defunct Internet outfits.

After an initial pandemic-induced lull, corporate share sales have come back with a vengeance, luring many of the same investors who pushed Apple's market cap past the US$2 trillion mark and ignited a broad rally in Internet companies worldwide.

Ant joins a stampede of companies that began trying to sell shares recently, from food delivery behemoth DoorDash to Airbnb.

July's almost US$19 billion in new listings was the busiest month for United States IPOs since September 2014, when 36 companies including Ant-affiliate Alibaba Group went public while raising US$36 billion.

"The multiple environment for technology companies is at the highest since the dot.com bubble," said Ms Lauren Cummings, Morgan Stanley's co-head of technology equity capital markets for the Americas.

"2020 is the year a lot of companies are going public but there are still many high-quality companies, probably multiple times of what we have this year, that are quality companies, that are scaled, that can go public next year."

Investors have questioned whether a 2020 run-up that has lifted marquee names from Apple to Facebook to Tencent is fuelling a bubble akin to that of two decades ago, which brought down much of the fledgling Internet economy when it popped.

Beyond the fundamentals, however, there are several unique aspects to this year's tech mania. One is sheer size. Ant's giant offering may skew comparisons with 1999, particularly if it surpasses Saudi Aramco's US$29 billion IPO last year as the largest in history.

The past year has featured an unusual number of first-time share sales on Hong Kong or mainland bourses by Chinese companies already listed abroad, fearing a backlash from an increasingly belligerent Trump administration. They include Alibaba, JD.com and top chipmaker Semiconductor Manufacturing International.


The rise of the hyper-local ChiNext and Star markets in China has also inflated this year's pipeline. Punters on the mainland have gobbled up loss-making debutantes like never before - triggering first-day rallies of over 2,000 per cent in some cases - partly because they believe Beijing will offer financial and other forms of aid for a Chinese tech sector seen as essential given the Trump administration's curbs on trade.

Finally, the unknown extent of the global economic downturn caused by the pandemic has led some companies to rethink their capital needs or speed up plans.

Airbnb, which was previously seen as a candidate for a direct listing, said last month it filed for a traditional IPO. Last week, on Monday alone, four biomedical companies, four blank-cheque companies and five software companies, including Unity Software, filed to go public.

"The year has been really busy for equity capital markets deals so far despite all the headline news," said Bank of America co-head of equity capital markets for Asia-Pacific Tucker Highfield.

"We expect to see strong IPO markets to the end of year as investors continue to look for higher returns."


A version of this article appeared in the print edition of The Straits Times on September 01, 2020, with the headline 'Jack Ma's Ant IPO fuels frenzy not seen since dot.com bubble'. Print Edition | Subscribe