Value Investing As Ant struggles to IPO, let's not forget what Ma did in 2009 and 2010

As Ant struggles to IPO, let's not forget what Ma did in 2009 and 2010

Posted: 06 Nov 2020 08:00 AM PST

It appears that Ma stole Alipay from fellow Alibaba shareholders who had previously given him the money he needed to scale Alibaba. He paid $51 million when its market value was conservatively $1bn+ and his co-shareholders didn't find out until a year later. In the end he had to agree to pay a little more than the initial price, but still nothing close to its market price (witness today's market value). He's not fit to be the promoter of an IPO.

Source: Clark, Duncan. Alibaba: The House That Jack Ma Built (p. 219). HarperCollins. Kindle Edition.

Relevant section:

Alipay was a critical cog in the Taobao machine, handling more than $700 million a day in transactions, more than half of the total market in China. As it was so integral to Alibaba, it was hard to put a value on the business, but one analyst estimated that Alipay was worth $1 billion.

But on May 10, 2011, it emerged that the Alipay asset had actually been transferred out of Alibaba Group the previous year. The business was now owned by a company, personally controlled by Jack, called Zhejiang Alibaba E-Commerce Company Limited. Jack owned 80 percent of the company, and

Alibaba cofounder Simon Xie (Xie Shihuang) held the rest. Investors first got wind of the transfer in a paragraph buried on page eight of the notes to Yahoo's quarterly earnings report. It read:

To expedite obtaining an essential regulatory license, the ownership of Alibaba Group's online payment business, Alipay, was restructured so that a hundred percent of its outstanding shares are held by a Chinese domestic company which is majority owned by Alibaba Group's chief executive officer. Alibaba Group's management and its principal shareholders, Yahoo and Softbank Corporation, are engaged in ongoing discussions regarding the terms of the restructuring and the appropriate commercial arrangements related to the online payment business.

A business potentially worth $1 billion just went missing? Investors were alarmed. Yahoo's shares dropped like a stone—losing 7 percent on May 11 and 6 percent the day after—wiping $3 billion off its equity market capitalization.....

Yahoo disclosed that neither it nor SoftBank had been told about the transfer of control until after the fact.....

Caixin confirmed, after an investigation, that Alipay was sold in two transactions, in June 2009 and August 2010, to Zhejiang Alibaba E-Commerce Company Limited, the firm controlled by Jack. The total price paid was 330 million yuan ($51 million).....

In an effort to clear up the matter in 2014 ahead of its IPO, Alibaba justified the transfer by explaining that the "action enabled Alipay to obtain a payment business license in May 2011 without delay and without any detrimental impact to our China retail marketplaces or to Alipay." Indeed, on May 26, 2011, Alipay, now entirely domestically owned, was the first of twenty-seven companies to be issued licenses22 and was awarded license number 001. But Jack's critics charge that because PBOC also issued licenses to foreign-invested companies, such as Tencent's Tenpay, and was the number two player in the market, then the argument that Alibaba had to transfer ownership of Alipay out of foreign hands doesn't hold water.

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Hard times: UK Economic Outlook

Posted: 06 Nov 2020 04:12 PM PST

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