Jack Ma might work against Alibaba’s best interests
Many investors are concerned over Alibaba's IPO prospectus' warning that the Chinese e-commerce giant's lead founder and executive chairman Jack Ma might work against the e-commerce firm's best interests.
The warning in the prospectus highlighted longstanding questions about potential conflicts of interests surrounding Ma as well as at Alibaba's complex corporate structure. What is bothering potential investors the most is Mr. Ma's several considerable investments in third-party companies that partner with Alibaba.
Around four years back, Alibaba spun out its PayPal-like affiliate Alipay to a group owned by investors including Mr. Ma, who owns a 46 per cent stake in Alipay. The move was objected by several of the company's investors like Yahoo and SoftBank, but Mr. Ma argued that it was required to comply with China's central bank regulations.
Investors and analysts are also concerned about Mr. Ma and Alibaba's related-party transactions as well as variable interest entities - the companies associated with Alibaba in which Mr. Ma holds a stake.
Prof. Jim Angel, of finance at Georgetown University, said, "You've got this complex web of variable interest entities, limited shareholder voting rights. There are definitely a lot of questions over this offering, but there's no doubt that Alibaba is a major e-commerce play."
A Beijing-based attorney said Alibaba's arrangements certainly raised serious questions about its corporate governance.
However, Alibaba claimed in the prospectus that its complex structures like "variable interest entities" were to its benefit.