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Alibaba set to gain from Alipay deal before its IPO
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E-COMMERCE giant Alibaba Group said that it has reached a deal that could give it more options to profit from its payment service Alipay, offering a potential boost to its valuation in a highly-expected initial public offering in the US later this year.
Alibaba Group will receive 37.5 percent of pre-tax profit from Small and Micro Financial, parent of Alipay, and will have the option to own as much as 33.3 percent of the company pending regulatory approval, according to an updated prospectus filed to the US Stock and Exchange Commission.
Alibaba Small and Micro Financial Firm's assets include Tianhong Fund Management Co, Zhong An Insurance Co, small loan related business operations and a possible private banking business.
Alibaba Group's valuation could climb because Alipay can provide a lot of value-added incomes as it expands into more sectors in the coming years, according to an industry source who's familiar with Alibaba businesses.
Alipay is expanding into the offline sector and it has joined hands with a number of convenience chain stores to offer payment services, as it's no longer satisfied with offering transactions for online vendors and buyers.
The initiative to revamp Alipay's stake structure means its investors will no longer worry about potential regulatory risks about Alibaba's small loan and online banking service, the source said.
Alipay's stakes were transferred into Small and Micro Financial Firm, a separate domestic entity controlled by Alibaba Group founder Jack Ma in 2011 in order to gain regulatory approval for its payment service.
Alibaba shares will start trading on New York Stock Exchange on September 16, according to media reports.
Yahoo Inc and SoftBank Corp, two major shareholders in Alibaba, said in separate statements that Alibaba's filing was negotiated on a collaborative basis.
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