What Do Investors Know About Alibaba’s Operations?

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May 7 (Bloomberg) -- Bloomberg’s Leslie Picker looks at how Alibaba operates as the company files for an initial public offering in the United States on Bloomberg Television’s “Bloomberg Surveillance."

Like the $20 billion offering.

There is a 168 dollar market value.

What did we learn from the filing about their operation?

One thing that was interesting about the operation as we learned a lot about the risk factors and things they are focused on in terms of what could be materially adverse to their business.

We learned about china's influence on the company.

We learned how big of a hand they have in their operations and what that means as a u.s. investor if you are investing in them, how the chinese government can impact those investments.

What about the registration?

A company does business in china which is registered in the cayman islands and this listing in new york but hong kong would not list them because there were too many confusing parts and the dual share structure.

Why are u.s. regulators allowing this?

A lot of people call this regulatory arbitrage in terms of filing in different places.

They filed in the u.s. primarily because of their partnership structure which was important to them.

It's not quite as severe as dual class in terms of shareholder friendliness.

However, it does a court a substantial amount of power to a small group of individuals.

In order to list in the u.s., if you are a chinese company in certain industries of which alibaba is one which includes internet companies, you need to do so via variable interest structure.

Variable interest entity structure is critical.

There was a real nice primer written on this last night, the idea of the cayman islands.

Why is this different than most class a/ class b structures and why did hong kong say no to this deal?

As an investor, you are not investing directly into alibaba.

There is a middle entity in between the two -- alibaba could lose its license to operate this variable interest entity.

As a u.s. investor, the money you have put into this company becomes essentially void.

You have no recourse and getting it back.

That is detailed in the risk factors in the prospectus and something an investor should be careful about.

There is 27,000 words of risk factors.

Adequate independent oversight -- where is the oversight?

You are the only one who has read this -- where is the oversight of what 12 people are doing with alibaba in china?

In terms of the partnership?

Where is the oversight of their financials?

I cannot find it.

That's what's interesting.

If you are familiar with the sec ban on accounting firms, they are audited by a hong kong auditor.

They have a lot of business with an affiliate in china which does their due diligence on their chinese operations.

Because that auditor has been banned, it could make it difficult for them to get those audits in.

In the filing, they did not include first-quarter numbers.

That quarter would have ended a little over a month ago.

We do not see first-quarter auditing in the prospectus.

Thank you very much.

Mark finnigan is with us as well.

You worked at google but this is not like the google share structure?

I think it's similar in that we have a founder with some people surrounding him who has maintained a lot of control even after they go public.

Where is the audit capability on alibaba?

The story is exciting because of what they have already accomplished.

You said before they represent about 80% of e-commerce in china

This text has been automatically generated. It may not be 100% accurate.


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