Ant Group US$35 bn IPO will be the largest IPO in the world. And undoubtedly, Ant Group is among the best fintech companies in the world, in terms of user base, growth, technology and product innovation. While we believe most investors in HK and China will participate in the IPO, we will share our analysis on Ant Group in the next few days from unique angles.
In order to understand the management structure of Ant Group, we recommend investors should not only analyze Ant Group IPO prospectus but also read Alibaba Annual Report. First of all, Alipay China was established under the laws of the PRC in December 2004 by Alibaba to provide digital payment services to consumers and merchants on Alibaba’s platforms. Thus, both Alibaba and Ant Group have close “relationships” and share the same set of “Mission” and “Vision”, which are described on P. 1 of the Ant Group IPO prospectus and P. 3 of the Alibaba Group Fiscal Year 2020 report. (Alibaba Group also mentioned 6 values on P. 4 of the 2020 report, but Ant Group IPO prospectus did not mention it. We do not know whether Ant Group also adopt these six values too.)
In order to promote “mission, vision and values”, Alibaba Group has set up a unique structure called “Alibaba partnership” and “The main duty of partners in their capacity as partners is to embody and promote our mission, vision and values. We expect partners to be evangelists for our mission, vision and values, both within our organization and externally to customers, business partners and other participants in our digital economy.” (P.169 of the Alibaba 2020 report). How important is Alibaba partnership? “Alibaba Partnership has the exclusive right to nominate or, in limited situations, appoint up to a simple majority of the members of our board of directors.” (P.170). Another interesting fact on the importance of Alibaba partnership is that the name “Alibaba Partnership” was mentioned 95 times on 27 pages, whereas “Board of directors” was only mentioned 57 times on 29 pages in the 2020 report. However, the term “Alibaba Partnership” was only mentioned ONCE in the Ant Group IPO prospectus. We do not know how Alibaba Partnership will promote mission and vision (with or without values) within Ant Group.
In the 2020 report, Alibaba Group disclosed that 11 out of the total 36 partners had a capacity in Ant Group and/or its substantial shareholders Hangzhou Junhan and Hangzhou Junao. Thus, Ant Group management and related persons have a significant role in the appointment of Alibaba Group board of directors. The following graph shows that Ant Group related person participation in Alibaba partnership is on a rising trend. As such, we strongly recommend Ant Group Investors should study Alibaba's report in details to better understand the relationship of both companies.
