Wall Street is eagerly watching what is expected to be one of the largest initial public offerings (IPOs) in history: the offering of the Chinese Internet retailer Alibaba at the end of this week. Investors have been described by the media as “salivating” and “flooding underwriters with orders.” It is important for investors, however, to keep their eyes open to the serious governance risks of investing in Alibaba.
In a New York Times DealBook column, posted today, I analyze these governance risks. I show that Alibaba’s ownership structure does not provide adequate protections to public investors. In particular, such investors should worry that, over time, a significant amount of the value created by Alibaba would not be shared with them. Investors participating in the IPO, I conclude, should recognize the significant governance risks they will be taking.
The column, Alibaba’s Governance Leaves Investors at a Disadvantage, is available here.