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Suspended Ant Group float ‘could be up in weeks’, says Tribeca’s Jun Bei Liu

The shock suspension of the Ant Group initial public offering, slated­ to be the biggest float in history­, has left investors reeling, but it could be back up and runnin­g within weeks, according to Tribeca Investment Partners’ Jun Bei Liu.
Cliona O'Down
The Australian
 • 
Nov 4, 2020

The shock suspension of the Ant Group initial public offering, slated­ to be the biggest float in history­, has left investors reeling, but it could be back up and runnin­g within weeks, according to Tribeca Investment Partners’ Jun Bei Liu.

 

While expressing confidence that the dual-listing IPO, which was set to raise more than $US34.5bn, would go ahead, Ms Liu raised the prospect of a lower price as investors ascribe a higher risk premium to the stock.

 

“It was a big surprise and really disappointing. But it sounds like a technical issue, like Ant needs to work with the regulator on the right metrics to be qualified for listing,” she told The Australian.

 

“I think it’s a setback, but just for the time being. We’ve seen over the years with China there are so many innovative industries that have been growing so fast, and the regulations have really just been playing catch-up.

 

“But these companies work with the regulator and they always thrive in that environment, they come through stronger. It also helps with overall transparency and clarity of what the regulation is. But, yes, it’s obviously very disruptive for the time being.’’

 

The Shanghai stock exchange suspended Ant’s IPO on Tuesday, just one day after regulators held a meeting with its founder, billionaire Jack Ma, along with the company’s other top executives. Following the suspension, Ant said it would also halt the Hong Kong leg of the dual listing.

 

Ms Liu said there was a good chance the IPO would go ahead before Christmas: “I think they will work very hard ahead of the Chinese New Year, for sure.”

 

The sudden halt to the IPO would likely see investors put a higher risk premium on the stock, she said. “Clearly that will put a bit of a dent in its valuation, but given how much demand there was, I think the business would work through it, and I still expect it to be well supported.”

 

Prior to the suspension, Ant had priced its IPO at $HK80 a share, giving the company a valuation in excess of $US300bn. ­Retail investors had scrambled to get a piece of the fintech, placing bids for $3 trillion in shares in the run-up to its debut. Investors had also been pumping the price up on the grey market in recent days.

 

If Ant does reprice the IPO, Ms Liu does not expect it to be a significan­t adjustment, given the clear demand for the stock.

 

“This fintech will be the fut­ure,’’ she said. “It’s growing rapidl­y, it’s got a very asset-light business model and it offers a service across every aspect of its customer. This is a very innovative, fast-growing business.’’

Escalating tensions between the US and China have sparked a technological decoupling that, over the next five to 10 years, will have two separate ecosystems ­develop, and investors will want to have holdings in both, Ms Liu said. “Ant really demonstrates that no longer are the days when if you want to buy tech stocks, you have to go to the US. I think the future of Asian tech is enormous and it represents a good diversification to a portfolio.

 

“From here on, a lot of global investors will start increasing their exposure to Asian tech or the Asian consumer for diversification and also for growth and the return-generating opportunity.”

 

Ms Liu will appear at the Sohn Hearts & Minds Investment Leaders Conference on November 13 to present her stock tip for the year. While it is not her debut at the annual event, it is the first time she’ll get to present to a virtual­ audience, which she says she’s excited about.

 

Ms Liu, who runs the $760m Tribeca Alpha Plus Fund, one of Australia’s longest-running equity long short funds, chose New Oriental Education as her stock tip at the 2018 Hearts & Minds conference, back when it was trading at $US55. It turned out to be a great pick, with the shares more than doubling over 12 months. They now sit at $US170.

 

Her follow-up pick last year, a2 Milk, hasn’t fared as well. The shares were trading just below $14 when she presented her idea to the conference in November last year, and are now sitting at $14.45.

 

“This is the very nature of equity markets. There’s always second chances,” she says. “At one point a2 was the best-performing stock on the Australian stockmarket. By April, the share price was up 30 per cent from the conference, at a time when the market was down 30 per cent. So the share price was phenomenal.”

 

When Ms Liu tipped a2 last November, the market was fixated on short-term earnings, she says. “One year on and again people­ are worried about near-term earnings. As an investor, I will be taking advantage of those short-term sentiment shifts or fears, where (investors) have really lost sight of the long-term growth potential for such a high-quality business.”

 

Without giving away her pick for this year’s conference, Ms Liu says it will centre on the same theme as previous years: Asia as the big growth opportunity. “You just have to have exposure to that front,” she says. “This year is particularly interesting. There’s one school of thought that says just pick a very cheap company, a value company, even if it’s low-quality, because given the economic recovery, it shall do well.

 

“Then there’s another school saying stick with growth, these companies have done so well. I don’t do the top down (investing), I stick to the stock story. I stick to its future, and I stick to the strength of the brand.”

 

 

 

This article was originally posted on The Australian here.

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