Alibaba restructures Alipay’s parent, Jack Ma’s share reduced

November 2, 2013 Leave a comment

Alibaba restructures Alipay’s parent, Jack Ma’s share reduced

3:42am EDT

By Matthew Miller

BEIJING (Reuters) – The online payment affiliate of China’s biggest e-commerce company Alibaba Group Ltd will be restructured to attract new strategic investors, in a move that will reduce the shareholding of Alibaba’s founder Jack Ma in the affiliate. Zhejiang Alibaba E-Commerce Co Ltd will be restructured as a new company in which 60 percent of its shares will be offered to new strategic investors, Lucy Peng, head of the restructured entity, said in a letter published on its official Weibo microblog account on Friday.Ma will see his shareholding reduced from 80 percent to about 7 percent in the new company, or no greater than his shareholding in Alibaba Group, according to the letter.

The restructured company, to be known as Alibaba Small and Micro Financial Services Group, will hold Zhejiang Alibaba’s 100 percent stake in unit Alipay, as well as its shareholding in Alibaba’s micro-finance unit, Zhongan Insurance, and Tianhong Asset Management Co.

Alipay is China’s biggest third-party payment platform, providing payment solutions to 460,000 merchants, and with 800 million registered accounts.

The remaining 40 percent in the new company will be offered to nearly 24,000 employees at Alibaba Group and Zhejiang Alibaba, said Peng, former chief executive of Alipay. That includes the share held by Ma.

The announcement on Friday will have no impact on existing agreements with Alibaba and the group’s shareholders SoftBank Corp and Yahoo! Inc, Alibaba spokesman John Spelich said.

In 2011, Ma sparked a public dispute with Alibaba Group’s biggest outside investors when he separated Alipay from Alibaba. Ma said at the time that new Chinese government regulations on third-party payment services required the changes.

The companies later settled, in a deal that guaranteed Alibaba 49.9 percent of Alipay’s earnings prior to an initial public offering, and as much as $6 billion if Alipay sells shares to the public.

“Today’s announcement underscores that employees of both Alibaba Group Holdings and Alibaba Small and Micro Financial Services Group are being incentivized to work hard to achieve success for the company,” Spelich said.

Alibaba Group, through Alipay, is introducing a variety of financial services to complement its e-commerce businesses. Besides Alipay, which provides users with an online payment system, the Hangzhou-based company has also started fund and insurance sales, as well as small loan finance.

In June, Alipay launched Yu E Bao, a fund management platform, allowing Alibaba customers to directly invest cash from their Alipay account into a money market fund managed by Tianhong Asset Management Co.

The Zenglibao fund is the most successful fundraising by any mutual fund in China this year, with managed assets reaching 55.7 billion yuan ($9.14 billion) at the end of September.

Alibaba also received approval this week from China’s securities regulators to act as a third party for the online sale of fund products on its Amazon-like Taobao.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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