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Alibaba Jack Ma Simon Xie

Ownership of Chinese assets

6 May, 2014

Alibaba’s securities filing reveals that due to foreign ownership caps in China, buyers of Alibaba shares won’t actually own part of the company’s mainland assets, but will purchase part of a Cayman Islands-incorporated structure called Alibaba Group Holding Ltd. that is entitled to a share of the profits of Alibaba’s Chinese operations. Ma and Xie will retain control of the company’s Chinese assets. At least one locality in China has declared the structure – known as a variable interest entity – to be illegal. Alibaba:

[…] there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, rules and regulations.