Banks working on Ant Group's Hong Kong IPO could get $396 million windfall

The banks working on the Hong Kong leg of Ant Group’s record-breaking initial public offering are looking at a windfall of as much as $396 million, although in percentage terms it is less than the city’s average for big deals.

Ant is set to raise as much as $19.8 billion in Hong Kong if it fully exercises an over-allotment option. The fintech giant disclosed in a filing that it will pay an underwriting commission of as much as 1 per cent of the total deal size, or $198 million. That’s below the average 1.45 per cent paid by companies raising over $1 billion in the city, according to data compiled by Bloomberg.

The final percentage, however, will only be decided around October 30, meaning the banks could end up receiving less. How the fees get split among the banks will also be decided later, though typically the sponsors take the lion’s share. That puts Citigroup, JPMorgan Chase & Co., Morgan Stanley and China International Capital in line for the biggest portion.

Part of the $396 million will come from investors, who pay a 1 per cent brokerage fee when buying shares.

An Ant representative declined to comment.

The only other IPO that is bigger than Ant in Hong Kong, AIA Group Ltd.’s $20.4 billion offering in 2010, paid banks 1.75 per cent. Budweiser Brewing Co APAC rewarded them 1.5 per cent of its $5.76 billion listing last year, while smartphone maker Xiaomi Corp. forked out 1 per cent.

Alibaba Group Holding only paid banks 0.25 per cent for its $12.9 billion second listing in Hong Kong last year, well below the average. However, such offerings tend to pay less, because, the argument goes, investors are already familiar with a company trading on another exchange.