Ant Financial is World’s Largest Fintech Company, Alibaba Owns 1/3 Stake
Chinese fintech firm Ant Financial has agreed to buy $100 million of shares in Brazilian digital-payments company StoneCo (ticker: STNE), adding to a list of high-profile buyers that have taken interest in the IPO slated to price this week at a valuation of up to $6.2 billion.
The investment from Ant Financial, which is an affiliate of Chinese e-commerce giant Alibaba, marks a tie-up between two of the world’s largest and fastest-growing payments companies. Earlier this year, China’s Alibaba took back a one-third stake in Ant Financial having spun the company out a few years earlier. Ant has recently raised billions of dollars privately from sovereign wealth funds and other large investors to fund its global expansion.
STNE, meanwhile, last week said that Warren Buffett’s Berkshire Hathaway and the family office of Wal-Mart heir Rob Walton had made formal indications of interest in taking a large chunk of the IPO shares offered. Backing from Mr. Buffett and Mr. Walton is both a sign of confidence in the business and a welcome pair of long-term holders who are unlikely to sell anytime soon.
The Ant financial placement will be priced at the same amount per share as the IPO but is a separate transaction so shouldn’t reduce the number of available shares for other investors.
However, the indications of interest from Mr. Buffett and Mr. Walton, along with another investor group, could account for a full 54% of the offering, according to calculations by IPO Edge in an analysis last week. That leaves a potential float of roughly $500 million – a relatively small amount for a high-profile company.
In turn, investors interviewed by IPO Edge say it may be difficult to get an allocation of shares in the deal. The high level of demand and limited supply could send the shares sharply higher when they begin trading on Nasdaq.
The STNE IPO appears to be impacting the share price of Brazilian peer company PagSeguro, which also went public earlier this year. PagSeguro shares jumped last week when the indication of interest from Messrs. Buffett and Walton were announced and the stock soared again Monday afternoon as the Ant Financial news was disclosed in an SEC filing.
Independent analysts say STNE has an opportunity to take advantage of deregulation and win market share from traditional bank players in the payments industry. “Stone’s is a story best understood in the context of the U.S. card market circa 2005, when one acquirer dominated the industry with 55% share and was a fat, happy, slow-moving, overly complex organization with antiquated technology and a selling capability in decline,” Craig Maurer of Autonomous Research wrote in an investor note. “Over the following 11 years, that acquirer lost 16 [percentage points] of market share to more nimble organizations with better technology. This is the state of Brazilian acquiring in the SMB segment today, and we think Stone is the best equipped to attack and win market share.”
John Jannarone, Editor-in-Chief