The media, citing knowledgeable persons, reported that the cloud unit of Alibaba Group Holding is currently exploring the possibility of conducting a private round of financing to raise funds from Chinese state-owned enterprises.

According to insiders, the cloud unit of the group of companies is considering the prospects of a financing round in preparation for the debut of its business in the Hong Kong market.

The tech giant is currently working with consultants on potential fundraising for Cloud Intelligence. The media, citing anonymous sources, report that this unit of the group of companies can attract from 10 billion to 20 billion yuan (from $1.4 billion to $2.8 billion). The technology giant, according to insiders, expects to participation in the round of financing of telecommunications companies that receive support from the state.

Alibaba planned to allocate a cloud unit by paying dividends on shares to shareholders within 12 months. The technology giant announced this in May. Bloomberg Intelligence analysts Catherine Lim and Marvin Lo argue that the potential raising of funds from state-owned companies will significantly increase the chances of the unit receiving cloud contracts from the government. If such a prospect is realized, the scale of use of the technology giant’s services will significantly expand. Analysts also say that during the listing, the cloud unit may be valued at more than $55 billion.

Insiders referred to by the media clarified that the discussion of the funding round is currently preliminary. So far, there is no information about the details of the investment, nor about the size and timing.

An Alibaba representative did not provide any data to a media request regarding the news about the planning of a funding round. Also, the three main state-owned telecom operators of China did not provide comments on this issue.

On Tuesday, September 5, the stock price of the technology giant in Hong Kong showed a decline of 1.2%.

Alibaba provoked something like a bombshell effect after announcing in March plans for a large-scale restructuring of the business, as a result of which six predominantly independent units will arise on the basis of a single functional structure. The tech giant also said that newly created companies specializing in intelligent retail and logistics will be put up for initial public offering.

The listing for Cloud Intelligence Group does not involve raising new money by selling shares to the general public. The sale of stakes to the so-called Chinese national team will ease the authorities’ concerns about business security.

The cloud business, the closest analogue of Amazon Web Services in China, in 2021 caused the wrath of local regulators. This was due to the fact that the company informed the world community of developers about a significant flaw in its software, without first notifying the authorities about it. Last year, an investigation was conducted into the possible role of the cloud unit in the largest cybersecurity data leak in China. In recent years, Cloud Intelligence Group has been losing ground in the market, losing its share to Huawei and China Mobile.

As we have reported earlier, Alibaba Sells Stake in Paytm.