Alibaba Pictures surges 22% on prospect of asset injection

Shares in Alibaba's Hong Kong-listed film production arm shot up more than a fifth on Wednesday after the group announced a possible asset injection that analysts say could solve Alibaba Pictures' financial woes.

Parent Alibaba Group, the New York-listed Chinese ecommerce group, said it was discussing a "possible injection of our online movie ticketing business and our financing and investment platform for the production of movies and other media content into Alibaba Pictures".

Both businesses under discussion for injection into Ali Pictures were founded in 2014 and are in the "early stages of development", according to Alibaba, which added that there was no guarantee a deal would go ahead.

One of the businesses is understood to be Yule Bao, a crowdfunding platform for film production.

Analysts said the jump in Alibaba Pictures shares - which had been suspended since March 24 - reflected investor optimism that the new assets could transform it from a loss-making business into an entertainment powerhouse.

The stock was up 22 per cent early on Wednesday afternoon.

Ricky Lai, of Guotai Junan International, a Hong Kong brokerage, said: "This would allow them [Ali Pictures] to do the whole chain, from financing to production to distribution of movies."

The announcement follows a rally in Ali Pictures shares that more than doubled the company's market capitalisation from $4bn in January to a little over $9bn. The gains came even as Ali Pictures in January warned of an expected loss for 2014 of $77m. At the end of March it reported a loss of $53m.

Alibaba bought its 60 per cent stake in Ali Pictures - formerly China Vision Media - for $800m in March 2014 as part of a $6bn shopping spree in the run-up to its record $25bn initial public offering that September in New York.

Shares in Ali Pictures were suspended from trading for five months last year after Alibaba said it was investigating accounting irregularities, which it blamed on the previous management team.

Jack Ma, Alibaba's chairman, has said he wants to build an entertainment company that produces original programming and movies, in addition to holding a large portfolio of content.

Ali Pictures has production or distribution agreements with several mainland TV stations, but has yet to produce anything.

Alibaba said on Wednesday that integrating its entertainment business with Ali Pictures "helps realise Alibaba Group's vision of making digital media entertainment available to our customers anywhere any time".

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