Last week, five newly-launched mutual funds consisting of strategically allocated shares from Ant Group’s upcoming initial public offering, exclusively went on sale on Alipay, China’s largest online payment service. Funds are subject to an 18-month lock-up period.
About 10 billion yuan ($1.5 billion) worth of five mutual funds were sold within an hour of going on sale last Friday morning. More than 7 million people have invested in at least one of the five funds, with two of the five products exceeded the fundraising target and stopped accepting new investors on Sept. 25. The remaining three funds are widely expected to be filled this week.
Ant Group, the parent company of China’s largest online payment service Alipay and the affiliate of Alibaba Group, has kicked off a concurrent IPO process on the Shanghai Stock Exchange’s STAR board and the Stock Exchange of Hong Kong (SEHK), looking to rake in at least $35 billion through an offering that could value the company at $250 billion, according to Bloomberg.
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The five funds managed by five different managers, including China Asset Management Co. and China Universal Asset Management Co., are targeting a combined 60 billion yuan, with each fund being capped to raise up to 12 billion yuan over a two-week subscription period.
Up to 10% of total raised assets are promised to take part in the IPO, which is one of the appealing characteristics of the five products.
Retail investors buy into the five funds directly or through Ant’s online payment platform Alipay, giving Chinese individual investors indirect access to the country’s biggest unicorn and its IPO.
Most of the country’s small investors are not qualified to trade on Shanghai’s technology-heavy Star Market, where Ant Group is set to be listed, because of asset thresholds.
Buying shares on the Star Market requires a minimum of 500,000 yuan in assets in stock accounts. In contrast, subscription to the 5 new funds on Alipay start from 1 yuan without any subscription fee.
Ant Group is best known for its mobile-payment services, but it aims to be a one-stop financial hub that also provides access to wealth management, investing and insurance services.
“There’s more potential for the marketing of wealth management and insurance products on its digital platforms,” said Wang Jian, an analyst at Guosen Securities. Analysts view the payments portion of the business as a gateway to brings users into Ant’s more complex offerings.