Yet another report has come out about an ongoing private placement by Ant Financial, saying the financial services affiliate of e-commerce giant Alibaba (NYSE: BABA) is now planning a domestic IPO in 2017. That's a little later than was indicated in previous reports, which were probably a little too optimistic about a company whose various businesses are mostly less than two years old.
But the more interesting element in this recent flurry of reports has been what valuation the new private placement will bring for Ant, which is financially separate from the New York-listed Alibaba. Some of the earlier reports indicated Ant could be valued at up to US$50 billion (HK$388 billion), which admittedly looks quite optimistic for a firm at its stage of development. But now the latest reports are bringing the number down sharply, saying the new funding will value Ant at between $35 billion and $40 billion.
So, what exactly is happening here and why are the valuations varying so widely? To begin with, valuing companies is always a tricky business, especially when they're just getting started in many new businesses. That's certainly the case for Ant, whose main money earner right now is Alipay, the electronic payments system that was previously spun off from Alibaba due to Beijing rules banning foreign ownership of such companies.
Ant's other assets are likely to include Yu'ebao, an investment service that competes with traditional bank savings accounts for deposits from general consumers; and a new private online bank now being set up by Alibaba and several partners, who recently received a license under a trial government program aimed at injecting more private money into China's banking sector.
