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Is Alibaba Comparable To a US Company?

Posted by timothy on from the well-the-name-is-magical-to-start dept.

lpress writes Alibaba is this week's hot news — they have had a lengthy PR campaign (preceded by a documentary film) followed by a record-setting stock offering. After a day of trading Alibaba's market capitalization was comparable to that of established tech giants. But, there are cultural and structural differences between Alibaba and U.S. companies. Alibaba is tightly woven into a complex fabric of personal, corporate and government organization relationships. The same can be said of information technology companies in Singapore. Is owning a share of, say, Apple, conceptually the same as owning a share of Alibaba?

5 of 126 comments (clear)

  1. What a question? by bogaboga · · Score: 5, Interesting

    Is owning a share of, say, Apple, conceptually the same as owning a share of Alibaba?

    How can this be the case? In a few instances: -

    If one is looking for return on investment, then it's probably the same.

    If on the other hand, one is looking for an avenue to influence company direction, owning shares in Alibaba and startng this effort is almost a guaranteed exercise in frustration, for Alibaba is a company with capitalist "genes" which have a tinge of socialist, heavy-handed characteristics.

    I should add that this isn't bad at all.

    1. Re:What a question? by Nemyst · · Score: 5, Informative

      Alibaba, socialist? The only thing socialist about it is that the Chinese party calls itself communist. Alibaba is a privately owned but state-blessed corporation with heavy state support. The communist party has a hand in pretty much every large Chinese corporation these days, and in the end they have the final call, and they'll be a lot more meddlesome than even the most pedantic of state regulators in the US.

      Plus, you can't even buy shares for Alibaba, you only get shares for a Cayman Islands shell corporation which has a contract to receive the profits from Alibaba proper. You get absolutely no decision-making power, no influence, and frankly little in the way of actual worth.

  2. Comparable? Not really. by caladine · · Score: 5, Insightful

    When someone buys a share in Apple, they actually get an ownership share in Apple.
    When someone says they're buying a share in Alibaba, they actually buying shares in a VIE called Alibaba Group Holdings Limited which was incorporated in the Cayman Islands. The VIE has contractual rights to Alibaba China's profits, but not anything that resembles ownership.
    It's not the same thing as share of Apple at all.

  3. Re:Style by Dahamma · · Score: 5, Insightful

    You don't know anything about it, do you?

    Basically if you buy "Alibaba" stock you actually bought stock in a Cayman Islands holding company that is somehow related to the actual Chinese company, since China does not allow foreigners to own stock in Chinese companies. It was a weird/complicated enough arrangement that apparently the Hong Kong stock exchange declined to offer it, and the NYSE was the second choice. It's unlikely of course, but if the Chinese government wanted to "close the loophole" investors could be out $20B+ in a day.

    So, no, it's not conceptually the same thing at all...

  4. US investors don't have shares in Alibaba ... by perpenso · · Score: 5, Insightful

    You seem to be speaking of Alibaba the Chinese retailer, so you are off on a tangent since that is not what US investors are putting their money into.

    What US investors are buying is interest in a Cayman Island “variable-interest entity”. Stockholders won't have the usual influence on corporate governance or management, such as it is. My understanding is that Chinese law doesn't allow foreigners to own a Chinese strategic asset. So this Cayman Island entity was created.

    http://www.marketwatch.com/sto...