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updated: 8/14/2014 7:19 AM

Alibaba hidden billionaires unveiled as Alipay estimate raised

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Bloomberg News

Simon Xie, an Alibaba Group Holding Ltd. co-founder and second-biggest shareholder of its finance affiliate that owns Alipay, may become a billionaire as the estimate for the value of the electronic-payment company rose.

Xie, 44, owns 9.7 percent of Zhejiang Ant Small & Micro Financial Services Group Co., the parent of Alipay, according to company filings obtained by Bloomberg News. Small & Micro Financial would be worth at least $25 billion when it sells shares in a public offering, according to an Aug. 12 filing with the U.S. Securities and Exchange Commission, valuing Xie's stake at more than $2.4 billion.

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The filing was made ahead of Alibaba's plan for potentially one of the biggest U.S. IPOs as the Hangzhou, China-based company transferred its small-business lending arm to Small & Micro Financial for $518 million in cash plus annual fees. Small & Micro Financial's key asset is Alipay, similar to PayPal, which analysts including IResearch's Wang Weidong say would be worth much more than $25 billion when it goes public.

"Alipay will be one of the business units that has the most potential in business growth following Alibaba's e-commerce business," said Wang, an analyst at the Shanghai-based Internet consulting firm. "The financial business is a great way for the company to generate money from its e-commerce data."

Xie holds the stake through one of the two companies that own Small & Micro Financial. He has about 16.7 percent of Hangzhou Junhan Equity Investment Partnership, which in turn owns 58 percent of Alipay's parent, according to company filings. Alipay processed more than three quarters of retail transactions on Alibaba's platform last year.

Jack Ma

Alibaba's founder Jack Ma owns about 49 percent of Small & Micro Financial, the filings show. His net worth is valued at $12.6 billion, according to the Bloomberg Billionaires Index. Joseph Tsai, Alibaba's vice chairman, has a fortune estimated at $4.8 billion, according to the index.

Florence Shih, a spokeswoman for the companies, declined to comment on the report.

The required equity value of the IPO of Small & Micro Financial or Alipay would be at least $25 billion, according to the filing. That's about 56 percent more than Alipay's previous upper-end valuation. Alibaba also has the right to buy a stake of about one-third of Small & Micro Financial with the approval of Chinese regulators, according to the filing. That could dilute the stakes held by Xie and other shareholders,

Alipay said in November it would offer a 60 percent stake to investors to spread equity to a broader worker base and give an incentive to employees.

New Billionaires

Any further increase in the valuation of Small & Micro Financial may yield two more billionaires. CEO Lucy Peng and Jonathan Lu, CEO of Alibaba, each holds almost 4 percent in Small & Micro Financial, according to filings submitted by the company in Hangzhou, where it's based, valuing the stakes at about $982 million each.

Peng and Lu also hold less than 1 percent of an undisclosed amount of shares in Alibaba, which may be worth $187 billion after its IPO, according to a survey of 11 analysts by Bloomberg in July. The Chinese e-commerce company could start marketing the IPO to investors on Sept. 3, people familiar with the matter said this month.

Ma would eventually cut down his stake in the parent of Alipay to a level that's doesn't exceed his holding in Alibaba, which stands at 8.9 percent, according to the U.S. regulatory filing.

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