Ant Group's $35 billion IPO unlikely to be hurt by possible U.S. curbs

By Scott Murdoch and Julie Zhu
HONG KONG (Reuters) - Ant Group's $ 35 billion initial public offering (IPO) is unlikely to suffer from U.S. restrictions on the Chinese financial technology giant due to its very limited overseas presence, potential investors and analysts said.
US President Donald Trump is considering curbing Ant, a subsidiary of Chinese e-commerce company Alibaba, and Tencent over concerns about the national security threat from their payment platforms, Bloomberg News reported on Wednesday.
If implemented, the restrictions would illustrate how the Trump administration is trying to prevent Chinese companies from embedding themselves in the US financial system before they become a significant competitive threat.
Ant said there were no known discussions within the administration about restrictions. Tencent and the White House did not immediately respond to requests for comment.
Ant is working on a double listing in Shanghai and Hong Kong, possibly as soon as this month. According to sources, this could be the world's largest IPO, topping oil giant Saudi Aramco's $ 29.4 billion float in December.
The Ant's Alipay and Tencent's WeChat payment platforms are mainly used by Chinese citizens with accounts in Renminbi. Most of their U.S. interactions are with merchants who accept payments from Chinese travelers and businesses in the country.
"Basically, the Ant Group's overseas sales are maybe 5% or less. That means its US sales contribution is even less," said Chelsey Tam, senior equity analyst at Morningstar.
"I'm sure investors will ask about this during the roadshow, but it's pretty easy for investors to understand that the US may not be the top priority with Alipay and Wechat Pay going overseas," said Tam.
According to Reuters, Ant, which makes 95% of its sales in China, plans to raise around $ 35 billion on an IPO after assessing investor interest early on, based on a valuation of around $ 250 billion or more.
The US has increasingly checked app developers for their personal information, especially if some of it is US military or intelligence officials.
In 2018, the U.S. Government Foreign Investment Committee (CFIUS) forced Ant to cancel plans to purchase MoneyGram International Inc of concerns about the security of data that could identify US citizens.
It was one of the first high profile U.S.-China deals to be blocked under the Trump administration.
An official for a state-backed Chinese fund, a potential investor in Ant's IPO, said he was not concerned about the proposed US restrictions, given that the market was only a tiny fraction of the company's overall business.
The officer refused to be named because he was not authorized to speak to the media.
"The ban is more about preventing Ant from expanding in the US in the future, but it shouldn't have an immediate impact on the valuation as Ant can see much more growth in China," said Supun Walpola, analyst at LightStream Research published on the Smartkarma platform.

(Reporting by Scott Murdoch and Julie Zhu; additional reporting by Kane Wu; writing by Sumeet Chatterjee; editing by David Clarke and Patrick Graham)

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