Alibaba Financial Service Unit Starts Second Fundraising

Alibaba Financial Service Unit Starts Second Fundraising

The financial services unit of Alibaba Group Holding began its second round of financing, an indication that it is moving to become a major player in the electronic finance sector in China. The second round of fundraising is also a step forward to becoming a publicly listed company.

The spokeswoman for Alibaba’s Zhejiang Ant Small & Micro Financial Services Group also known as Ant Financial refused to disclosed the sum of the fundraising or the expected valuation. She also stated that the company has no schedule for an initial public offering (IPO), according to a report from the Wall Street Journal.

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The spokeswoman added that fundraising would be denominated in Chinese yuan to make it easy for the company to list in mainland China. So far, Ant Financial received financing from only yuan-denominated investors.

A related report from Bloomberg indicated that Ant Financial aims to raise at least 10 billion yuan ($1.5 billion) from its second round of fundraising before its planned IPO.

The fundraising last year resulted in Ant Financial’s valuation in tens of billions of dollars, according to people familiar with the matter.

During its first round of financing last year, Ant Financial raised more than 12 billion yuan ($1.9 billion) from outside investors such as Primavera Capital led by Fred Hu, a partner of Goldman Sachs Group. The company also received funding from the national security fund of China.

Alibaba payment platform to benefit from the fundraising

Alipay, the operator of Alibaba’s payments platform, will benefit from Ant Financial’s second round of financing. Alipay is expected to receive more funds from the financial services company to expand and set the stage for an IPO. Alipay is the largest payments platform in China.

Alipay was previously part of Alibaba. However, Jack Ma, the Chairman of the Chinese e-commerce giant decided to separate and control the payments platform—a move criticized by Yahoo, its major shareholder.
Alibaba explained that the separation ensures that Alipay continues to operate its business under the new rules implemented by the Chinese government.

Bankers are expecting the Alibaba affiliate to launch its IPO over the next two years. However, its plan for a public offering is still uncertain.

Ant Financial could expand its banking arm

Market observers also suggested that Ant Financial could use the new capital from its latest fundraising to expand MYBank, its banking unit.

It was reported last year that WeBank, the online banking unit of Tencent Holdings, a competitor of Alibaba, plans to raise new capital worth $1 billion. Tencent also operates a competing payments platform called WePay.

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