Increased investment caused a loss
Ant Financial caused Alibaba (BABA) a $132 million loss in the second quarter of fiscal 2019. A year ago, Alibaba booked a $300 million profit courtesy of Ant Financial. Alibaba has a profit-sharing arrangement with Ant Financial, but on a bad day, this arrangement also means sharing the payment company’s losses, which happened in the latest quarter.
Alibaba portrayed the latest loss from Ant Financial as palatable. The company explained in its latest quarterly investor update that the Ant Financial loss stemmed not from the business losing market share but from its stepping up its investments in acquiring more customers, enhancing its product portfolio, and expanding overseas.
International push dealt a blow
In terms of overseas expansion, Ant Financial is investing $100 million in a stake in Brazilian card payment company StoneCo, which has filed to go public in the United States. Berkshire Hathaway (BRK) is reportedly investing in StoneCo’s IPO.
Ant Financial has long sought to expand its international footprint, but its attempt to accelerate its global expansion was dealt a blow earlier this year when the US government blocked it from acquiring global money remittance company MoneyGram (MGI). The block happened after Ant Financial had boosted its bid for MoneyGram to $1.2 billion after Euronet Worldwide (EEFT) challenged its original $880 million bid.
Stage set for an Ant-Tencent clash in Brazil
Ant Financial is investing in StoneCo at a time when Brazilians are increasingly shifting from cash to card payments. But Ant Financial isn’t the only Chinese company that has sensed opportunity in Brazil’s payment market. Tencent (TCEHY), a fierce rival of both Ant Financial and Alibaba, backs Brazilian digital payment company Nubank.