Will Investors Fund Alibaba and a Den of Thieves?
Greed may overcome common sense for the Alibaba IPO
Los Angeles, CA, September 17, 2014 - Investors are eager to get in on Alibaba’s $20b IPO Friday. Likely to be the largest IPO in US history, ironically Alibaba is likely to be the largest proliferator of counterfeit products in the world. China’s Alibaba Group and its subsidiary websites are very well known to manufacturers and the US Government for the proliferation of counterfeit goods, a $1 trillion global criminal enterprise.
A recent 2014 lawsuit graphically alleges Alibaba’s business model;
“Together, the Alibaba Defendants and the Merchant Defendants are an enterprise whose intentional and repeated sales of Counterfeit Products into the United States constitute a pattern of racketeering pursuant to l8 U.S.C. § 1962(c).”– Kering S.A. et seq., Plaintiffs 14 CV 5119
What you don’t know about the Alibaba IPO.
- Investors are not buying into the assets of Alibaba China, owned by Alibaba founder Jack Ma and Simon Xie. Foreign stock ownership in China is limited, so a Cayman Islands entity, Alibaba Group Holdings Ltd., was formed as a “variable-interest entity” (VIE) to circumvent the China law. Shareholders will receive shares in Alibaba Group Holding Ltd., but have no say in Alibaba China operations.
- One ruling by the Supreme People’s Court of China determined the VIE structure was illegal. Alibaba acknowledged in its filing that “there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, rules and regulations.”
- Approximately a third of the IPO shares are not covered by the usual "lockup" period protections which prevent early investors from selling their shares in the IPO. Founder Jack Ma is expected to sell about $800 million of his holdings.
- A small group of investors bought $1.7b in convertible Alibaba shares in a behind-the- scenes transaction in 2012. Their early investment may more than triple with the offering.
- Alibaba founder Jack Ma separated the AliPay payment unit from Alibaba Group in 2010 and took it under his control without the approval of, and completely blind siding major Alibaba stockholder Yahoo.
- Alibaba subsidiary Taobao.com was on the US Government’s “Notorious Markets” List from 2008 to 2012. The list identifies select online and physical marketplaces that reportedly engage in, and facilitate substantial piracy and counterfeiting.
- Just off the “Notorious Markets” List in 2013, Alibaba subsidiary Taobao.com removed a staggering 115 million counterfeit or infringing product listings in just 9 months. It is unknown how many counterfeit products were simply re-listed and sold to unsuspecting consumers.
- In April 2014, China was added to the Office of the US Trade Representative “Priority Watch List” which identifies countries that "present the most significant concerns regarding insufficient Intellectual Property Right (IPR) protection or enforcement."
- There is nothing proprietary or innovative about Alibaba. Alibaba’s e-commerce websites did benefit from higher transaction volume due to very poor intellectual property enforcement and government regulation for profitable counterfeit and infringing product listings on their websites. It’s just a copy of other e-commerce websites.
- The financial bottom line impact of removing counterfeit and infringing product listings, and the impact of lawsuits has not been determined. In its filing, Alibaba reveals "We may be subject to allegations and lawsuits claiming that items listed on our marketplaces are pirated, counterfeit or illegal."
- The S.E.C. cannot ban offerings for being “too risky” or even for potentially being illegal. The only thing the regulator can do is require disclosure of the risks.
The investor focus should be economic growth for America and renewing efforts challenging this illegal activity, not forwarding investor support for criminal activity that destroys US companies, weakens economies and threatens the health and safety of consumers. Caveat Emptor
Website: www.TheCounterfeitReport.com
Facebook: https://www.facebook.com/pages/The-Counterfeit-Report/131568053660579
###
