Alibaba’s shares fell 5.9 per cent today after the company announced its Q3 revenue surged 56 per cent and it is acquiring a 33 per cent stake in its payment affiliate Ant Financial.
Ant Financial, which operates Alipay, was spun out from Alibaba in 2011 ahead of its 2014 IPO and is controlled by Alibaba founder Jack Ma.
As part of the new deal, Alibaba will acquire newly-issued Ant Financial equity in exchange for certain intellectual property rights owned by Alibaba that are exclusively related to Ant Financial.
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No cash is changing hands, but after the deal closes the companies will terminate the current profit-sharing arrangement under which Ant Financial pays royalty and technology service fees in an amount equal to 37.5 per cent of its pre-tax profits to Alibaba.
The reunion is considered part of the groundwork for an expected initial public offering for Ant Financial.
“Importantly, an equity stake in Ant Financial enables Alibaba and our shareholders to participate in the future growth of the financial technology sector,” said Daniel Zhang, Alibaba Group CEO.
The company also announced its financial results for the quarter ended December 31, 2017.
Third quarter revenue rose 56 per cent to $12.8 billion.
Core ecommerce revenue increased 57 per cent to $11.3 billion and cloud computing revenue jumped 104 per cent to $553 million.
Revenue from digital media and entertainment increased 33 per cent year-over-year to $832 million.
Alibaba also increased its FY18 guidance, forecasting revenue to grow between 55 and 56 per cent, up from the previous guidance of 49 to 53 per cent.
Annual active consumers on Alibaba’s China retail marketplaces reached 515 million, an increase of 27 million from the 12-month period ended September 30, 2017, the largest net add in the past 12 quarters.
In December 2017 mobile MAUs on Alibaba’s China retail marketplaces reached 580 million an increase of 31 million over September 2017.