HONG KONG -- Ant Group is set to raise about $34.5 billion in the world's largest initial public offering after setting the prices for a dual listing in Hong Kong and Shanghai that will thrust the Chinese fintech into the ranks of the world's most valuable financial institutions.
The company, controlled by billionaire Jack Ma, on Monday said it will sell shares at 68.8 yuan ($10.27) each in Shanghai to raise $17.14 billion, while it will offer shares in Hong Kong at 80 Hong Kong dollars ($10.32) per share to net $17.24 billion, before any overallotment options, according to filings.
If the IPO is successful, Ant will surpass Saudi Aramco's $29.4 billion share sale last year.
The company will offer a combined 11% stake by issuing 1.67 billion shares on each exchange. The plan will value the company at about $313 billion, just behind JPMorgan Chase & Co. and well over Bank of America's current market capitalization.
The Hong Kong leg of the IPO starts on Tuesday and prices on Friday.
Ant will take subscriptions in Shanghai on October 29, with only 20% of the offering reserved for retail investors. The company is expected to make its debut on the two exchanges on Nov. 5, two days after the U.S. election.
In the preliminary price consultation in the mainland, institutional investors subscribed for more than 76 billion shares, or 284 times the offering, according to the filing in Shanghai. The company may raise another $5.2 billion if the 15% greenshoe option is exercised by underwriters, it said.
Ma, also the founder of Alibaba Group Holding, has billed Ant's IPO as historic. "It's the first time that the pricing of such a big listing -- the largest in human history -- has been determined outside New York City," Ma said on Saturday in Shanghai, according to a report from Reuters.
"We didn't dare think about it five years ago, or even three years ago. But a miracle just occurred," he said.
Retail investor frenzy has also been building for the IPO, with brokers putting together record margin-lending facilities to meet demand. Investors have resorted to selling other holdings to increase cash levels and applied with brokers to access margin loans to ensure they get a slice.
Nearly 40% of Hong Kong residents invest in the city's stock market and they typically borrow heavily to invest in IPOs to improve their odds of share allocation.
In mainland China, retail investors have rushed into mutual funds that will bid for the IPO, and they also are preparing to invest directly in the stock. Institutional investors have also been building their war chests to invest.
Viggo Cheung, a 27-year-old media executive in Hong Kong, is one of those preparing to subscribe, lured by Ant's innovative technology and dominance in the mainland. Cheung, who has profited by investing and exiting more than a dozen IPOs last year, is planning to apply for margin financing with Hong Kong brokerage company Futu Holdings.
"The competition is really intense this time," he said. "But if my subscription is successful, I'm sure that it will be a profitable investment in the long run."
Cheung plans to bid for 80,000 Hong Kong dollars ($10,322) worth of Ant shares. About 90% of the funds are expected to come from Futu, and he usually borrows at an interest rate of 3.98%.
Futu, an online broker backed by tech conglomerate Tencent Holdings, is set to provide nearly $4 billion in Ant margin loans, its biggest-ever such facility, according to a spokesperson.
"We accurately anticipated the vast interest in the Ant IPO and subsequently managed to lock in HK$30 billion in financing for our customers," the spokesperson said.
Hong Kong-based Bright Smart Securities & Commodities Group will provide as much as HK$50 billion, it highest-ever as well, based on demand. The Hong Kong unit of Singapore-based broker UOB Kay Hian is ready with HK$20 billion.
Bright Smart is offering to fund up to 95% of individual investor bids for Ant shares and has seen strong interest, CEO Edmond Hui told Nikkei Asia.
"Ant has enormous potential for business growth," he said. "It is believed that the IPO of Ant will be in high demand. Investors should pay attention to the borrowing cost, as the rise in stock price may not be able to compensate for the margin financing interest."
Interest on these seven-day loans range between 2% to 3% and are dependent on the Hong Kong Interbank Offered Rate, or Hibor. The two-week Hibor climbed five consecutive days through last Friday to its highest level since June.
The two-week Hibor is quoting more than the one-month tenor -- meaning the cost of borrowing for two weeks is more expensive than that for one month -- with the spread between the two at the highest level this year, indicating the short-term money-market squeeze.
Investors have to pay brokerage fees for executing trades, and in hotly contested IPOs need a large enough pop during the first trading days to make a profit. This year, retail demand for new listings has been so aggressive that companies repeatedly have had to reduce the portion that institutional investors can buy.
In September, Chinese bottled-water maker Nongfu Spring received retail bids equal to over 1,100 times the shares on offer in its $1.1 billion IPO.
More than 8,300 investors, who each applied for HK$4.3 million worth of Nongfu shares, ended up with only HK$12,900 worth of shares, or a 0.3% allotment rate. While investors ended up paying interest on a large portion of the shares they bid for, they still came out ahead. The stock surged as much as 85% on its first day before closing that day with a 54% gain.
Investors are betting that even if they do not have a similar payday with Ant, they will make money in the long run.
"We are advising our retail and wealth management clients to invest in the IPO even if they are reliant on margin financing," Kenny Wen, wealth management strategist at Everbright Sun Hung Kai, which also is offering margin financing.
"Ant is something that has to be in clients' portfolios and is promising 40% annual revenue growth," he said. "In the event of returns being limited in the first few days, it is worth holding the stock."
In the mainland, five mutual funds raised $9 billion in just days from more than 10 million retail investors through Ant's Alipay platform, with 10% of the funds earmarked for the IPO. An average of eight investors placed orders each second during the subscription period.
The funds opened a path for investors with insufficient capital to invest directly in the IPO. On Shanghai's STAR Market, investors need to have at least 500,000 yuan ($75,000) in their stock accounts to trade on the market.
Residents of mainland China are able to invest in the Hong Kong market through personal accounts they may have in the city or through the Stock Connect program, which allows investors to trade in each other's markets.
Strategic investors who have agreed to accept a 12-month lockup will account for 80% of the Shanghai listing. Alibaba's online retail platform Tmall will subscribe to 730 million shares, according to the prospectus in the mainland.
Global investors have been pouring money into Hong Kong to ensure they get a slice of the offering. The city has seen nearly HK$190 billion of inflows since Ant filed its IPO application on Aug. 25, forcing the Hong Kong Monetary Authority to intervene multiple times to keep the local currency inside its trading band with the U.S. dollar.