Ant Group Trades at 50% Premium in Hong Kong Gray Market

Institutional investors are buying Ant Group Co.’s Hong Kong shares before this week’s debut at a premium to the listing price.

Some trades were executed for HK$120 apiece in gray-market trading Monday, according to people familiar with the matter. That’s 50% higher than the listing price of HK$80. The people declined to be identified as they are not authorized to speak to the media.

In a so-called gray market, investors can bid for new shares before they officially start trading on a stock exchange. The over-the-counter mechanism is often seen as an early indicator of investor demand for an initial public offering. Retail buyers will be able to trade through a similar channel a day before Ant’s Thursday debut.

An investor stampede into Ant Group’s initial public offering has fueled predictions the shares will pop on the first day. Demand for its Hong Kong shares was so strong that the firm stopped taking orders from professional investors a day earlier than scheduled. Institutions and strategic investors may take up about 97.5% of the offering in Hong Kong, according to Ant’s prospectus, though the figures may change due to clawback and greenshoe provisions.

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Ant Group — controlled by billionaire Jack Ma — also attracted at least $3 trillion of orders from individual investors for its dual listing in Hong Kong and Shanghai. Bidding was so intense in Hong Kong that one brokerage’s platform briefly shut down after becoming overwhelmed by orders. Demand for the retail portion in Shanghai exceeded initial supply by more than 870 times.

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