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May 27

Yahoo and China’s Alibaba Face Major Battle over the Sale of Alipay

Posted by Bill at 08:27 | News | Comments(1) | Reads(7108)
The Chinese firm Alibaba Group Holding Ltd., recently sold Alipay.com Co. Ltd. Alipay is China’s largest online payment processor, and was 100% owned by Alibaba. The sale went through without the knowledge or approval of the board of directors or shareholders.

alipay yahooYahoo, who owns a staggering 43% of Alibaba, saw its share price drop almost 12% since the announcement of the sale. Alibaba stated “That in order for it to get the Chinese governments approval for an operating license for Alipay, its shares must be owned 100% by Chinese citizens.”

Doing business in China kinds of reminds one of the wild, wild, west, where anything goes, at anytime. The first question that comes up when you read these kinds of statements is, “Since Alipay already had an operating license, why did it need to spin off from its parent company?”

Of course, they didn’t, but the people behind this extremely shady deal, could have not made the kind of money they did, without some kind of excuse.

The second questions that would immediately pop up, “Is how is it possible to sell a major segment of your business without the knowledge or approval of the board of directors and shareholders?” Once again, this could only happen in completely unregulated environment that has a very poor, if any legal system, that will hold those responsible for the consequences for their actions.

Alibaba Group’s CEO Jack Ma, did not and could not let the board of directors know of this transaction, since Yahoo has seats on it, and would have vehemently disapproved of the sale.

To give you an idea of what kind of money we are talking about here, the magazine Forbes, reported that that Jack Ma offered to buy 15% of the 43% Yahoo owned in Alibaba last year, for $3.5 billion.

The chief executive officer of Yahoo! Inc., Carol Bartz stated that, “Yahoo is working feverishly with Alibaba, in order to see that it is appropriately compensated for the loss of Alipay.”

This certainly must greatly disturb all of those Wall Street investors who have flocked to China in recent years because of the short term returns that its stock market has been able to deliver. Only time will tell how this story plays out. But one thing is for certain, if you are an investor in China, you must have a “Bunker Mentality”, to withstand this almost daily barrage of horror stories about the countries business ethics, and the totally inadequate laws that protect foreign investors.

China has the largest uptapped investment potential of our times, however, unusual risk exists for overseas investors due to political or cultural reasons, protect your investment by subscribing China stock market news.

I didn't know that Yahoo owns 43% of Alibaba. I learned a lot from your blog.
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