Alibaba Group Holding Ltd and its competitors Tencent Holdings and Ping have partnered to gather funds for their joint venture online insurance according to Alibaba news. Most of the analysts are bullish about the joint venture and said that fund raising could make an amount over $8 billion estimated target at first.
News of this plan were revolving for more than a year after the companies declared that they are joining hands to launch Zhong An online insurance company. The plan to raise funds mainly targets equity companies, and they also have plans for an IPO for the company in the year 2018.
It’s almost the end of first quarter of 2015 and we have already seen some major tech firms are looking for fund raising. Irrefutably, the prevalent news was Tencent and Alibaba seeking to get at least $1 billion in the initial stages of fundraising.
Tencent holdings and Alibaba Group have a joint market value of over $400 billion. However Peng is the 2nd biggest insurance company. Sources told, Zhong An has completed its deal with investors of Hong Kong and the initial round of raising $1 billion will provide 12.5% ownership in the firm.
Zhong An was established in 2013 with $162 million of finances in registered capital. The business model of the company includes cargo insurance, property insurance, guarantee insurance, and credit for the online e-commerce.
Remarkably, after 16 months the company was able to exceed its breakeven and becomes profitable. In spite of prominent credentials, analysts are anxious why the company delayed the fundraising part. Furthermore, $1 billion is a huge amount be keeping in mind that it is the initial step of the joint venture into the market.
Though, putting all the mix-up away, Zhong An has certainly come up with a tactical fundraising move . Bearing in mind the joint venture appears to be in initial stages, it has already managed to get finances of over $8 billion. Ping An –one more party of the joint venture single handedly valued at $100 billion beating competitor New China Life which is valued at $17 billion.
The venture will have a 20% ownership of Alibaba Group Holding Ltd and 15% by each Ping An and Tencent. Beside these big companies, Zhong An contained 6 more fundraisers out of which the most noticeable was Ctrip –an online travel agency.
Zhong An strategy of fundraising is similar to that of Qunar’s -a travel agent that too joined hands with Baidu Inc. and commands remarkable valuations in spite of generating continues losses.
Alibaba stock increased by 0.49% and reached $84.58 on Friday..
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