What is the plural of prospectus? Would-be Alibaba shareholders can ponder this as they read the fourth version of the company’s listing document. This time, the main change (aside from eight extra pages of risks) is to the relationship between Alibaba and its internet payment platform, Alipay.
Before anyone gets excited: Alipay will still not be owned by Alibaba. Control rests with Jack Ma and economic benefit with his inner circle. Alibaba has transferred a small enterprise lending company to Alipay’s parent company, Small and Micro Financial Services Company. In return, Alibaba will receive cash, a cut of the disposed lender’s profits, and a fee on its assets.
But Alibaba’s share of Alipay’s profits will also be cut. Alibaba will now take 37.5 per cent of SMFSC’s profits before tax, against 49.9 per cent of Alipay’s previously. Alibaba buys Alipay services at “preferential” rates, paying $210m, $265m and $378m, respectively, over the last three fiscal years. Its cut of Alipay’s profits came to $4m, $45m and $284m. In the most recent year, for example, Alibaba would have received $35m less on the new terms.