On the Brink of IPO, Alibaba Group is Reportedly in Discussions to Buy back Alipay

According to data from data analysis and online tracking firm iResearch, the total transaction volume by independent mobile payments services from China increased by 707%, rising to $201.2 Billion (1219.74 Bn Yuan) in 2013. Alipay, a subsidiary of Alibaba, accounted for 75 percent of the country’s mobile payment market as of June. On 1st May 2014, WSJ reported that Alibaba Group is in discussions with its major share holders to buy back a stake in Alipay, which was sold in 2011 to an establishment operated by Jack Ma.

Alipay is an online payment services provider founded by the Alibaba group in 2004. The system allows individuals and businesses to make payments online in a secure manner. Alipay’s users are primarily buyers and sellers engaging in e-commerce transactions. Alipay has partnered with some leading Chinese banks includingBank of China, China Construction Bank, Agricultural Bank of China, the Industrial and Commercial Bank of China and Visa.

  • The discussions revolve around several options, among which is the purchase by Alibaba of one-third of Alipay, the Journal said, citing one of the unidentified people.
  • One scenario being discussed with a major shareholder would have Alibaba taking a one-third stake in Alipay, according to WSJ.
  • Alipay provides solutions for Taobao and along with over 500,000 external merchants for virtual gaming, online retail, digital communications, airticketing, commercial services and utilities fee payment transactions.
  • The possibility of direct ownership in Alipay could add to investor excitement says WSJ, enabling Alibaba's future shareholders to benefit from Alipay's growth, especially in its payment services for non-Alibaba clients and in its financial services.

These discussions appear as Alibaba Group gets ready for an IPO offering this year that is evaluated at over $80 Bn.

The total volume of Alipay’s mobile payments surged past 900 billion yuan, or $150 billion said the company in February. This surpasses the combined volume of U.S.based rivals PayPal and Square. Alibaba Holding Group Ltd is a network of e-commerce B2B businesses constituting an online marketplace, shopping search engine, retail and payment platforms and more. It is led by chairman Jack Ma, whose net worth is $3.6 Bn.