Ant Group, the Chinese payments company, wants to sell its U.S.-based biometric security arm amid stricter scrutiny of user data, according to a report.
Ant, which is one-third owned by China’s e-commerce giant
Alibaba Group Holding
(ticker: (BA)(BA)), is in hot water with regulators there, who want to force it to be more bank-like. It scrapped its highly anticipated public stock debut last year, which was to be the biggest IPO ever.
Dow Jones reported on Wednesday that Ant intends to become a financial holding company and has submitted a restructuring plan to regulators.
The Financial Times reported Ant’s intentions to sell EyeVerify, a Kansas City, Mo., company used by big U.S. banks to scan users’ faces as a password for mobile devices.
Ant bought EyeVerify in 2016 for about $100 million and owns it under its Zoloz Global division. When it bought the company, Ant got approval from the U.S.’s Committee on Foreign Investment, which scrutinizes U.S. asset purchases by foreign entities for national security issues.
The FT said Ant has contacted several potential U.S. acquirers, citing people familiar with the talks. Ant wouldn’t comment to the FT.
But it underscores the pressure from the U.S. on Chinese companies that handle personal data of Americans. The Trump administration raised questions about the popular social media apps TikTok and WeChat. Ant offers a major digital payments app called Alipay.
Alibaba, founded by Chinese billionaire Jack Ma, is also under scrutiny in China for anticompetitive practices. But Wall Street analysts have called the stock good deal.
Alliance Bernstein started coverage on the e-commerce giant with a Market Perform rating, the equivalent of a Hold. It set a price target for Alibaba of $280.
Bernstein’s Robin Zhu said Alibaba can out-compete and outspend offline rivals.
Zhu rated rival companies
(3690: Hong Kong),
(JD), a buy-equivalent Outperform. “Armed with generous access to capital, massive troves of data, and access to consumers via push notifications, our companies have long track records of creating new markets,” Zhu said in a note earlier this week. “We expect them to continue to out-compete and outspend offline rivals, and project strong growth across most key end markets.”
Shares of Alibaba fell 1.3% on Wednesday, to around $262.40. The price target set by Bernstein implies another 6.8% gain.
Last week analysts at Truist raised their price target to $326, which would be a 24% gain from the current price. Deutsche Bank calls Alibaba a Buy with a $319 price target, implying a 22% gain.
Alibaba, like other e-commerce companies, has benefited from the stay-at-home lifestyle brought on by the pandemic. The shares are up more than 28% over the last year, compared with a 17% gain in the S&P 500.
The shares got a jolt last week when Ma appeared on a videoconference with teachers, ending months of speculation about his whereabouts. Ma had last been seen publicly in October, when he criticized China’s state-owned banking system.
Beijing is taking on Alibaba from multiple directions, including its scrutiny of Ant’s lending practices, data protection rules that could crimp Alibaba’s revenue growth, and an antimonopoly probe.
Truist analyst Youssef Squali, who has a Buy rating on Alibaba, says third-quarter results are expected to be strong, highlighting that the company has been a big beneficiary of China’s economic momentum post-pandemic there.
Analysts expect Alibaba to report earnings per share of $3.20 for the quarter, according to FactSet. That would be a 22% gain over the prior year. Third quarter sales are estimated to be $32.9 billion, up 42% from the prior year.
Write to Liz Moyer at Liz.Moyer@barrons.com