Alibaba has divested from more than 50 companies since its initial public offering in 2014, amounting to RMB 18 billion (USD 2.5 billion) in gains, according to a presentation delivered by Maggie Wu, the CFO of Alibaba during the company’s Investor Day held on September 23 and 24.
Alibaba invests mainly to achieve unrivalled growth, gain efficiency, and invest for the future, the presentation slides posted on Alibaba’s official website shows.
Alibaba invests more for synergy effects to its ecosystem than for financial returns, according to 21st Century Business Herald, citing Wu’s comments on a summary of the same presentation. Wu added that when investees no longer provide much strategic value for Alibaba, the company will just divest from them.
Nonetheless, at the Investor Day, she named 10 companies Alibaba has successfully exited, highlighting their positive financial returns. Here are five of the companies Wu mentioned.
In November 2015, one of Alibaba’s venture capital vehicles invested RMB 15.5 million (USD 2.2 million) into Hangzhou-based cybersecurity solution provider DAS-security, which is also known as DBAPP Security Co., LTd, according to latest initial public offering prospectus updated on June 26 by DAS-security.
The prospectus did not disclose Alibaba’s stake right after the investment but stated that after a registered capital enlargement from the company in January 2016, Alibaba had a 34.46% stake.
In September 2017, Alibaba transferred part of its shares in DAS, which represented RMB 7.5 million, or 48.4% of the money it poured in the company, to six other investors. This divestment allowed Alibaba to get back RMB 205.5 million, representing a more than 12-fold investment return in less than two years, according to KrASIA‘s calculation on all transactions.
Alibaba will still hold a 10.81% stake in the company after the IPO, which is around the corner, via the Star Market of China’s Shanghai Stock Exchange.
DAS also said in the latest prospectus that the company has business relations with companies in Alibaba’s ecosystem but this represents a very minimal percentage of its entire business, indicating that even if Alibaba exited from the company entirely after the IPO, the withdrawal would have very little impact on the company’s business operation.
Alibaba invested USD 200 million in photo-messaging app Snapchat in March 2015, valuing the Los Angeles-based company at around USD 15 billion, according to Reuters.
Snapchat went public two years later, raising USD 2.4 billion in net proceeds from its IPO. However, Alibaba did not show up on the company’s final prospectus.
It is hard to tell when Alibaba exited Snapchat from the public information currently available.
Beijing-based film company Enlight Media disclosed in a filing on September 2 that its stockholder, one of Alibaba’s VC investment arms, planned to sell up to 58.7 million shares 15 trading days after the announcement over the next six months, accounting for no more than 2% of the company’s entire shares.
Before this announcement, Alibaba held an 8.78% stake in the company, according to this filing.
Enlight Media is the publisher behind Ne Zha, an animated movie which has booked RMB 4.95 billion (USD 694 million) in ticket sales by noon of Monday, the second best-selling film in China’s film history. The company made RMB 1.5 billion in total revenue in 2018, down by 19% year-on-year but booked nearly RMB 1.4 billion in net profits, up by 68.5% year-on-year.
Alibaba spent nearly RMB 2.4 billion to get this stake in March 2015, according to the company’s filing with the securities regulators then.
Enlight Media closed at RMB 9.5 per share on Friday, which means Alibaba might be able to collect back RMB 500 million from this partial stake offload. But as the market fluctuates day to day, it is still hard to tell whether Alibaba can finally make a positive return from its final exit.
Alibaba and Tencent led US-based switch chip maker Barefoot Networks’ USD 23 million Series C round in November 2016. The startup was to be acquired by Intel, KrASIA reported in June. There is no public information on how much Alibaba has earned from this investment.
Alibaba set up its own chip making subsidiary called Pingtouge in Chinese or T-head in English. Pingtouge has released its own in-house chip called Hanguang 800 earlier this month.
Alibaba led the USD 50 million Series B round financing in Beijing-based Meituan in 2011, when the latter was still focusing on the group-buying business in China, according to Chinese media outlet The Beijing Times.
Meituan in 2015 merged with Dianping, a restaurant review platform based on user-generated content, and shifted its focus to on-demand services such as food delivery.
The new company Meituan-Dianping received USD 2.3 billion in a new round financing from investors led by Tencent in early 2016 and was, at USD 18 billion, valued much higher than before.
Alibaba’s management told investors attending the company’s earnings call conference in January in 2016 that its exit from Meituan would be only a matter of time.
Since then Alibaba tended to bet bigger on Koubei, a joint venture it set up with Ant Financial that also provided listings and reviews of local service establishments including restaurants.
Alibaba in 2018 acquired food delivery company Ele.me and later merged Ele.me and Koubei to catch up with Meituan-Dianping.
The Chinese e-commerce giant still held a 1.48% stake in Meituan, Chinese media outlet TMT Post reported in June 2018, citing Meituan’s initial public offering prospectus filed with the Stock Exchange of Hong Kong that month.
Although it is hard to tell whether Alibaba has exited Meituan entirely, the final financial return could be handsome as the company’s valuation kept increasing before it finally went public in Hong Kong in September 2018.
Meituan’s market capitalization stood at about HKD 462.6 billion (USD 59 billion) on Monday.