Three questions Alibaba doesn’t want investors to ask

US investors have questions for Jack Ma.
US investors have questions for Jack Ma.
Image: Reuters/Carlos Barria
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The past may haunt Alibaba’s hotly awaited stock offering.

The landmark IPO of the Chinese digital e-commerce giant could kick off this week with the filing of paperwork to list its stock in the US as early as today, according to reports.

However, past disputes with stakeholders around corporate governance and scandals at Alibaba’s 15-year-old business may prove worrisome for some potential investors in the company controlled by chairman Jack Ma. Some shareholders already have told Quartz that they harbor some concerns about Ma’s control over a sprawling online empire that could boast a value of $160 billion (or more) when his stock offering is wrapped up. (We reached out to an Alibaba spokesman for comment, and will update this when we hear back.)

Corporate governance

Investors remain worried about the way Alibaba spun off its Paypal-like digital payment company Alipay back in 2011.

The spin-off, which Alibaba argued was necessary to comply with then-new China regulations, raised the hackles of major investors in Alibaba, namely Yahoo (paywall). Yahoo and other major Alibaba stakeholders complained that they were kept in the dark about the spinoff of Alipay into an entity controlled by Ma until months after the deal was done. This occurred even though Yahoo officials at the time held a seat on Alibaba’s board. (According to the Wall Street Journal, Alibaba is in the process of buying back (paywall) that Alipay stake).

One large institutional investor who spoke to Quartz says questions about Ma’s approach to corporate governance will be top of mind among prospective buyers of the shares. “How do we know things like that won’t happen again?” said the official at a large money management firm, who declined to be identified.


Three years ago a scandal at Alibaba Group’s global business-to-business site,, was followed by the resignations of senior executives David Wei and Elvis Lee.

Salespeople at had allegedly been colluding with what company officials described as “professional criminals” to create false storefronts and evade verification procedures. They were granted China Gold Supplier status–a sort of seal of approval that indicates the trustworthiness of the vendor–and then proceeded to defraud buyers.

Alibaba concluded that neither Wei nor Lee were involved in fraud, though they accepted responsibility for “systemic breakdowns.”

Alibaba has taken steps to improve its business practices. (For example, two years ago it was taken off the US Trade Representative’s office’s notorious markets list of businesses known for counterfeiting.)

But investors will still want to know know what sort of protections will be in place to prevent a replay of potentially costly scandals.


Investors will also want to know how much Chinese politics could impinge on the web giant’s profitability.

Ma has hinted at some of the power the Chinese government holds over his business. For example, Ma pointed to Chinese regulations as one of the reason Alipay was transferred into a separate ownership structure back in 2011. The Chinese government wasn’t pleased with digital payment systems like Alipay because they facilitate transactions outside of the government’s control.

More recently, the People’s Bank of China has exerted more control over Alipay, including restricting the issuance of virtual credit cards, just a few days after Alibaba announced its own virtual credit card program.

“The frontier areas that Alibaba can move into are exciting, but they all face some government hurdles—like financial services, or telecommunications, or media,” Porter Erisman, a former Alibaba vice-president, told the Guardian back in April. “These are all areas that are inefficient because they’re state run.”