Could Alibaba’s Ant Financial Be Building a War Chest?

Could Alibaba’s Ant Financial Be Building a War Chest?

Alibaba’s (BABA) finance affiliate, Ant Financial, has ambitious goals that could require deep pockets to bankroll. Its goal to shift its main focus to technology services and away from payments and consumer finance could require Ant to increase its research and development investments and opportunistic acquisitions to acquire technologies it may not want to build from scratch. Ant aims to reach 2.0 billion consumers globally with its Alipay payment service in future years, which could require launching Alipay in more countries.

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$14 billion in funding

Ant has been building a war chest to finance its huge ambitions. The company raised $14 billion in June in a funding round that valued it at more than $150 billion. Rival JD Finance, an affiliate of JD.com (JD), is said to be looking to raise $2.0 billion in new funding. Ant said it would use the funds to accelerate its global expansion. The company suffered a setback earlier this year when the United States slowed its global push by blocking it from acquiring global money remittance company MoneyGram (MGI).

IPO on the horizon

Ant is expected to go public as soon as next year. Several Chinese technology companies have gone public in recent months, including smartphone maker Xiaomi, which is listed in Hong Kong, and IQIYI (IQ), which is listed in the United States. IQIYI, an online video service, was previously Baidu’s (BIDU). In its second-quarter results, its first report as a public company, IQIYI said its revenue grew 42.6% YoY (year-over-year) in the quarter. Baidu, China’s leading online search engine company, also runs a finance unit it is planning to spin off as an independent company.

Alibaba is swapping its profit share in Ant for a 33% equity stake in the business ahead of the expected IPO. Revenue rose 61% YoY to $9.9 billion at Alibaba in fiscal Q4 2018 (ended in March).