Mr. Jack Ma has form in terms of rearranging parts of his empire on terms not wholly to the liking of other interested parties Yahoo 2011 Spat; but investors seem not to care about past events, especially if they believe they’re still on a profitability-rocket-ship-to-God.
The paper highlighted today is a detailed study that every holder of Alibaba and every potential buyer of the Ant Financial IPO should be familiar with. It highlights how both companies are de facto controlled by one man and that his control will persist irrespective of his shareholding.
It further shines a light on the contractual arrangements, the so-called VIEs, that hold both groups together and how one man is also again the de facto controller of these giving him double leverage in terms of overall control of both groups.
As the authors note at the beginning of their analysis “Whether this is good news or bad news for investors depends on one’s beliefs about Ma’s future objectives. Investors who trust Ma to steer Alibaba to deliver value for American shareholders should be relieved. Investors concerned that a founder owning less than 5% of Alibaba’s equity might one day siphon off substantial value for himself and his friends should worry.”
Enjoy the ride(s) if you’re involved but bear in mind, unlike other Chinese companies where governance safeguards are flimsy in the case of Alibaba and Ant Financial they are, from a practical perspective, non existent.
You can access the report in full via the following link Alibaba: Synthetic Control.
Happy Sunday.