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Corporate governance after Alibaba IPO

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Corporate governance should be a concern to investors

On Friday September 19, Alibaba Group Holding Ltd (NYSE: BABA) joined the league of the world’s top conglomerates. The company had a one of kind debut after its IPO surpassed both Visa Inc’s (NYSE: VISA) and Agricultural Bank of China’s IPOs to become the largest IPO ever.

Prior to the IPO, a research had indicated that there was U.S. investor apathy arguably due to the company’s corporate governance structure. However, the company’s profitability and its market demographic countermanded this making it worth the risk. Now the IPO is gone and investors wake up to the reality that Alibaba’s corporate governance is its greatest liability.

Corporate governance and legal structure

We should not let the success of Alibaba sway us away from the underlying corporate quandary. While the company has performed exceptionally, it was then a private company. Under the public light, a lot comes into play and this is why its atypical structure came into limelight in the first place.

Some of the concerns of Alibaba’s structure revolve around two areas namely:

  • The powers of Alibaba partnership
  • The company’s VIEs structure

The power of Alibaba partnership

Alibaba partnership is a group of 27 members, including company’s co-founders and its top executives. The group nominates more than half of the board, giving it an overwhelming control over the company.

Backers of this structure will be quick to name companies in the U.S. that have done well with similar structures. Yes, the likes of Facebook Inc (NASDAQ: FB) and Google Inc (GOOG, GOOGL) have structures that impel their founders to total control positions. But remember, these are companies in a country with a good legal framework and where the rule of law prevails. Alibaba on the other hand hails from a country with an opaque economy where even social platforms such Facebook, Twitter and YoutTube are banned.

VIE Structures

Jack Ma has in the past proven that he can secretly transfer the company’s asset. He did this in 2011 when he divested Alipay without Yahoo! and SoftBank having a single clue Isn’t this a reason enough for investors to demand effective measures to tie his free hands?

Optimistic point of view

I know that the aforementioned concerns are at the back of the mind of every investor who holds Alibaba shares. Most people have decided to give Alibaba and China the benefit of the doubt.

After all, it is not totally wrong to give Jack Ma control of the company he founded from scratch. It is known that companies struggle when they sideline the company founders. Founders often have a clear picture of what they want to achieve with the company and are willing to go the extra mile to fulfil their dreams.

A good example is Apple Inc (NASDAQ: AAPL), which after sending Steve Jobs packing, had to contend with diminishing image and lack of fresh ideas to maintain the company’s name in the PC market. Steve Jobs return did not immediately reflect on the company’s performance, but it led to the company producing a revolutionary product that changed how people buy digital content.

Since Jack Ma had managed to bring Alibaba to the limelight with limited resources, he is expected to do better now that he has the backing of the stock market. And as for China, let’s pray that the Beijing may see the good in Alibaba and use it as marketing tool to make it prestigious destination for investors. Nevertheless, the success of Alibaba still heavily relies on the mercy of communist rulers of China.

iPhone 6 and 6 Plus in China’s Black Market

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iPhone 6 and 6 Plus sells like hot dogs in China’s Black Market

The third week of September, to be precise on Friday 19th, was a very important period in the tech world. As the Chinese e-commerce giant Alibaba (NYSE: BABA) was making its debut on the New York stock market, Apple Inc’s (NASDAQ: AAPL) iPhone 6 and 6 Plus were making their debuts in Apple stores. However, in China things were different as both the stock investors and smartphone consumers were blocked from enjoying these with the rest of the world.

On September 9th, Smartphone consumers in countries such as US, Australia, Hong Kong and Japan were elated to hear that iPhone 6 and 6 plus would be available in their respective countries on September 19th. And since the smart devices made their debuts, consumers have been queuing in large numbers at Apple shops. The consumers in China have to wait a while longer as their country is not even listed among the countries where iPhone 6 and 6 Plus are to be shipped this month.

China Black Market

China has a huge appetite for Apple products, and this has led to massive growth of a well organised underground market. The market consists of rogue vendors and private individual willing to risk to take advantage of the thirsty market.

While iPhone 6 and 6 Plus have not been officially launched in China, approximately 5 millions units have already been smuggled into the country. This is according to research agency Counterpoint Research. Nevertheless, the devices are prohibitively expensive.

Over the years, the government of China has promoted local products at the expense of their foreign rivals. Pending the approval of the new iPhone models in China, the black market has thrived with a number of Chinese consumers flocking Hong Kong, Japan and Australia to smuggle these smartphone to their country.

Chinese consumers had to wait for 3 months for iPhone 5 to officially start selling in China. During this whole time, the black market offered them a backdoor to acquire the device, albeit at a higher price.

The hype and buzz surrounding the debuts of iPhone in China has often rejuvenated the market. When the iPhone 5 eventually launched in China in December 2012, 47.8 million units were sold.

Currently, a new iPhone 6 handset fetches as much as $5,000 in mainland China, while in Hong Kong it retails at about $1,300.  The same phone is just about $700 on Apple’s Hong Kong website. On the other hand, the Hong Kong vendors sell iPhone 6 Plus at about $3,600, which is more than double the price of its sister.

Conclusion

China’s black market has demonstrated how far people in China, where Apple trails local tech companies and Samsung in market share, are willing to go to get hands on the new iPhone. Isn’t this good news for Apple? However, it is up to the company to speed up its engagement with the Chinese government to sanction the sale of iPhone 6 and 6 Plus in this market, and help its consumers from being exploited by the black market. Until then, the grey market will continue to expand.

LinkedIn’s Chinese Version Targets World’s Largest Online Community in China

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Professional networking site LinkedIn is all set to enter the World’s largest online community. According to sources, LinkedIn has launched a Chinese version of the site to target the 618 million internet users currently in the country. However, how the Chinese Government is going to react to this news? Will the Government make the entry of LinkedIn easier, when it didn’t do that for any of the global media giants earlier? China has always seen to be very reluctant and suspicious when it comes to media exposure.

Although China is a huge market for most global media players, they always had to go through huge scrutiny and abide by tons of restrictions which made flexible operation almost impossible for these companies. It’s not possible that LinkedIn is not aware of such incidences. Despite being well versed with China’s reaction to media freedom, why LinkedIn seems to act so indifferently?
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China Defends Blocking Western Websites Like Twitter Or Facebook

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It is a known fact that the Chinese government has launched some very severe restrictions on social media channels such as Twitter or Facebook, and it seems that China defends blocking these western websites. The main reason why the Chinese government has taken this measure is because these media sites allegedly have the ability to spread rumors, and the media must fall in the law of the country and to best serve the interests of its people. The Chinese ambassador to the United Kingdom claimed that media must be good and properly inform the Chinese citizens instead of spreading rumors and promoting bias against the country.
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Foxconn Has Just Sent The First iPhone 5S Shipment To China Mobile

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Apple Inc. (NASDAQ:AAPL) has recently closed a deal with the China Mobile network provider – in a nutshell, Apple has convinced the provider to start selling iPhones on the Chinese mobile market, given the substantial opportunities posed by it (hundreds of millions of potential buyers).

Foxconn Technology Co. is known as the manufacturer of Apple, as it has been creating products for several years now – the company has recently shipped more than one million iPhone 5S units to the China Mobile Network provider, just before the iPhone 5S launch was scheduled on Friday. This is only the first shipment to the Chinese provider and there will certainly be more to come, although Foxconn Technology is yet to be informed about the future supplies of iPhone 5S units to China Mobile.
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The Chinese Mobile Market – Apple’s Biggest Technology Market

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With a customer base of well-over 700 million people, China’s mobile market is undoubtedly the biggest opportunity for Apple Inc. (NASDAQ:AAPL), who is constantly looking for ways to boost its iPhone sales. As a matter of fact, Apple does want to get a greater market share in the Chinese mobile industry and to actually dominate it, and make its main competitors (such as Samsung, which is Apple’s number one rival at the moment) fall on the second place.

Apple has closed a deal with China Mobile, a deal according to which the latter will start selling iPhone devices on the network. China Mobile did not do that until now, but this deal seems to be a mutually beneficial one – China Mobile will increase its revenue by selling such a popular smart phone, and so will Apple.
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Apple Broadens Its Alliance with China Mobile

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Apple (NASDAQ:AAPL) is a household name. In fact, this mobile manufacturing giant was the most admired company in the world from 2008 to 2012 according to Fortune Magazine. Apple is also the third largest manufacturers of mobile phones in world behind Nokia and Samsung. It is also the second largest mobile phone company by revenue. However, Apple’s revenue and market share has been dwindling for the last couple of years. This is why Apple must make headway in China. In other words, China is a market that Apple cannot afford to lose.

Greater China i.e. mainland China, Honk Kong and Taiwan is the third largest market for Apple after Europe and America. This makes it a very important market for Apple in terms of future growth. For example, Apple’s CEO Tim Cook has repeatedly stated that in last year’s final quarter Apple sold a record number of iPhones in Greater China. This means that making headway in China could actually improve Apple’s fortunes. In fact, the fourth quarter revenue for Apple in Greater China rose by six percent to stand at a whopping $5.73 billion.
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Apple Reduces Product Prices In China

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It is a known fact that the Chinese market plays a crucial role for the success of Apple Inc (NASDAQ:AAPL), with tens of millions of devices sold to the Chinese people on a yearly basis. As a matter of fact, this year alone Apple, is expected to ship up to 20-25 million iPhone 5S to China.

There is no better way to celebrate the well-known Chinese New Year than by reducing the prices of two of Apple’s most popular products: the MacBook and the iPhone 5, and the Chinese people surely seem thrilled about the idea. One thing is for sure, though: Apple does seem to have big plans for the Chinese market in 2014, as the multinational company has recently announced a blossoming partnership with China Mobile.
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Apple Partners With Alibaba For Webshop In China

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Apple Inc (NASDAQ:AAPL) is one of the most reputable electronics manufacturers in the world, and it would do anything to boost the sales of iPhone 5, one of the most-awaited smart phones. This is why it has partnered with Alibaba to boost the sales in China – as a matter of fact, the Iphone maker is expected to open its tenth live shop in China in a few days, in addition to the online stores it already has in this country.

The most recent official online store was opened by the Cupertino company on Tmall, which is operated by Alibaba Group Holding. At the time being, Tmall hosts no less than 70,000 merchants, some of which are worldwide renowned such as Nike Inc.

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