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Why JD and Alibaba Are in No Rush to List Finance Units

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Are IPO plans for JD and Alibaba in the slow lane?

When JD.com (JD) followed in Alibaba’s (BABA) footsteps and separated its finance unit JD Finance, there was speculation that it was preparing the unit for an IPO (initial public offering). Alibaba spun off its financial services arm, Ant Financial, before it went public in the US (SPY) in 2014. The separation of Ant Financial was also viewed as laying the groundwork for its IPO.

However, JD and Alibaba have recently cast doubt on the IPO plans for their finance units. In an October 2017 interview with the Wall Street Journal, Ant Financial’s head of international operations, Douglas Feagin, noted that an IPO was “not a necessity or a priority.”

Before Feagin made this remark, JD’s co-founder and CEO, Richard Liu, said in an interview with CNBC that he was not in any hurry to take JD Finance public.

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Liu owns 4.3% of JD Finance

JD.com sold its entire stake of nearly 70.0% in JD Finance in a spin-off, which garnered ~$2.1 billion in proceeds. However, the company retains the rights to 40.0% of the business’s profits.

JD is allowed to convert its profit share in JD Finance into an equity stake in the business. Liu owns 4.3% of JD Finance and has considerable influence over the business’s decisions.

Listing is not a competition

JD.com and Alibaba haven’t been in a rush to list their finance units, which appeared to be the natural course when they separated these businesses. These companies don’t view the IPO process as a competition.

For JD Finance and Ant Financial, expanding in their existing territories, launching in new markets, and venturing into new service areas seem to be higher priorities than going public.

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