Weeks before the Chinese e-commerce juggernaut is due to start a roadshow for an initial public offering, it has tidied up relations with its payments affiliate. Though the new arrangement is still a lot messier than shareholders might want, it should make for a neater IPO.
Alibaba’s relationship with Alipay is complex and sensitive. The unit processes more than three-quarters of the transactions on the Chinese group’s websites, but has been owned by a private vehicle controlled by founder Jack Ma since 2011. That business, known as Small and Micro Financial Services Company (SMFSC), is also home to other ventures like its fast-growing money market funds. For customers, the units connect seamlessly. The corporate links are more complicated.
The latest reshuffle aims to draw a clearer line between the two entities. Alibaba will focus on e-commerce, while SMFSC will stick to finance. As part the deal, Alibaba is handing its affiliate a portfolio of loans to small- and medium-sized enterprises. The transfer helps to reduce the risk of meddling by Chinese financial regulators.