How Alibaba's U.S. IPO Got the Company Ordered Out of Taiwan
Taiwan wants to kick Alibaba.com out because it's Chinese. Of course, everybody has known since its inception that Alibaba, the world's largest e-commerce operator, is Chinese.
What's operating in Taiwan, however, is Alibaba.com Singapore E-Commerce Private Ltd. When that company was registered on April 9, 2008, Jack Ma's outfit was doing what it does in many countries, and indeed what many corporations do in many countries: operating via an offshore holding company.
But in Taiwan, the difference between being Singaporean and Chinese is as stark as night and day. If your company is from Singapore, the U.S., Japan or just about anywhere, then Taiwan is open for business. If you're from mainland China: not so much.
It's not that investment from mainland China is banned, it's just that restrictions are more severe and mainland investors have more hoops to jump through.
Brief history lesson: Taiwan’s formal name is the Republic of China, a government founded in 1911 and moved to Taiwan in 1949 after Communist Mao Zedong defeated Nationalist Chiang Kai-shek and forced the vanquished to flee to the island. China and Taiwan have been at military and political loggerheads ever since. China wants to unite the two, but Taiwan isn't so keen. Taiwanese want China's money, they're just more skeptical of a political union.
That's why Taiwan treats Chinese investment differently. Its regulator for such matters, the economics ministry's investment commission, had long suspected that the Alibaba operating in Taiwan wasn't Singaporean so much as Chinese, its spokesman, Emile Chang, said by phone. They just didn't have the evidence to prove it, so they let Alibaba continue in Taiwan as if it were the Singaporean entity it had claimed.
Then Alibaba Group Holding Ltd. filed for its record-breaking U.S. IPO.
While Yahoo! Inc., Singapore's Temasek Holdings, Ma and everyone else got rich, Taiwan got a nice little present too. The hundreds of pages of pre-IPO documents, such as Alibaba's prospectus, contained the information Taiwan's investment commission needed to prove what it already thought it knew, Chang said.
So now that it has evidence of the alleged Chineseness, it's ordered Alibaba out by the end of August. They could either sell the business or close it, Chang said.
Alibaba though, doesn't appear ready to walk away. Taiwan is an important market, Ma told reporters in Taipei later the same day. It complied with the law when it entered, and complies with local laws wherever it goes, he said.
"We will actively communicate with related parties to clarify the issues and, if necessary, will take proper actions to protect the legitimate interests of Alibaba.com," the company said in a statement.
With 100 employees and just 140,000 registered users, Taiwan isn't exactly a profit center for the company. Yet it's putting down NT$10 billion to open a venture capital fund to support young Taiwanese entrepreneurs.
That fund, of course, will need Taiwan government approval.