August 17, 2016
“Taobao was wildly popular with consumers, but a commitment to free listings ensured that the business was still loss-making. So, instead, Alibaba decided to list only its original B2B business: Alibaba.com.”
August 17, 2016
“The former Alibaba.com CEO added that the 2007 IPO gave him two insights into Jack’s approach. The first was something that Jack had often told him: “Raise money when we don’t need it. When you need it don’t go out to raise money, it’s too late.” The second was that the IPO allowed Alibaba to take care of its employees: “Jack understands people more than any business. He knows business well, but if you ask me the three skills Jack has amongst people, business, or IT? IT is the worst. Business second. First is people.” ”
August 17, 2016
“ But Jack was emphatic: “We are a B2B marketplace. Nobody comes to trade every day. We are more important a community than our marketplace. The same for Taobao; nobody comes to shop every day. If you downgrade this forum you are focusing too much on profits. Switch it back to a non-revenue-generating entry point to the business community.”
August 17, 2016
“But there was a method to Jack’s madness. Jack was serious about putting the customer first, but David emphasized Jack was not espousing “an ideology of ‘let’s give everything for free.’” Instead, Jack was “always trying to understand how to get the money back later. He’s just not greedy about getting the money first.” Looking back on the price cut, David concluded that the move was well timed”
August 20, 2016
“Jack’s defenders argue that he was simply first to see which way the regulatory wind was blowing. Parking the Alipay asset into a domestic company that he controlled could insulate Alibaba from the risk that new licenses expected to be issued by PBOC would be denied to foreign-invested companies. In an effort to clear up the matter in 2014 ahead of its IPO, Alibaba justified the transfer by explaining that the “action enabled Alipay to obtain a payment business license in May 2011 without delay and without any detrimental impact to our China retail marketplaces or to Alipay.”
Indeed, on May 26, 2011, Alipay, now entirely domestically owned, was the first of twenty-seven companies to be issued licenses22 and was awarded license number 001. ”
August 20, 2016
“ Alipay already had such a dominant share of the market that it could not have expected such leniency. There were thousands of companies active in the third-party payment market, but with the first batch of licenses issued in May, PBOC also issued a deadline—September 1, 2011—for all companies to either obtain their own licenses or merge with an existing license holder. Inevitably this generated a lot of tension. Companies that had operated in a gray area now found themselves being divided into black and white, based on whether they had foreign investment and had obtained a license. Those that had not yet received licenses faced the risk of going out of business, and those that had received licenses but were foreign-invested were concerned that Alipay’s move threatened their own ability to have IPOs in the future, ”
August 20, 2016
“A number of Alipay’s rivals described to me a meeting hosted by PBOC soon after the licenses were issued, at which Jack was present. Many vented their unhappiness at Alibaba, but Jack remained silent. Yet even without the licensing issue, the reality was that too many companies were chasing after the oasis of fortunes to be made in payment riches. This turned out to be a mirage: With fees as low as 1 percent of transactions, if licensing hadn’t thinned out the field, then competition would have done the job anyway. In this light, the Alipay incident—and the PBOC licensing regime it triggered—merely accelerated the inevitable: Many payment companies found themselves stranded in the desert, soon to run out of funding. One executive summed it up for me: “There were more ‘payment solution’ companies out there than consumer e-commerce companies. It was like being in a kitchen where there were more chefs than diners in the restaurant.”
August 20, 2016
“Jack said that “today’s situation is not designed [by us], but [we are] compelled to do it. The complexity of decision making of shareholders and the board is also a problem of corporate governance in the future.” He added, “I have three principles of doing things: first, one hundred percent legal; second, one hundred percent transparent; third, I must let the company develop sustainably and healthily.”
August 20, 2016
“Jack revealed that his disagreement with Son was long-standing, that they had been “fighting over it regularly in the past few years.” Jack also contrasted his approach to equity ownership. “Seventeen thousand employees at Alibaba all have shares,” he said. “You see that from the day that Alibaba was established until today, my share has been getting smaller and smaller.” Jack argued that Son, by contrast, had a stake in Alibaba of “thirty percent from day one, and now it is over thirty percent.” In a sign of the tension that had erupted between the two men, he invited journalists to look at Son’s approach to his own employees at SoftBank:”
August 20, 2016
“If he [Son] is asked to take out one percent [of his stake], it’s like pulling out a tooth from a live tiger.”
August 20, 2016
“Finally, on July 29, an agreement was reached. The transfer of the assets would stand. But Yahoo, benefiting through its continued stake, would receive compensation of $2 to $6 billion from the proceeds of any future IPO of Alipay. Alibaba, Yahoo, and SoftBank were ready to put the dispute behind them. But investors in Yahoo were underwhelmed, particularly by the cap of $6 billion,26 and its shares fell 2.6 percent on the news. But in a call explaining the agreement to investors Joe Tsai pushed back vigorously, saying that the transfer was made to stay in line with government regulations: “If you own a hundred percent of the business that cannot operate, you own a hundred percent of zero.”
August 20, 2016
“ On May 21, 2012, the terms were made public: Alibaba would pay Yahoo $7.1 billion ($6.3 billion in cash and up to $800 million in preferred stock) to buy back half of Yahoo’s stake, or 20 percent of Alibaba, netting Yahoo some badly needed cash: $4.2 billion after tax. Alibaba also made a commitment to buy back a quarter of Yahoo’s remaining stake by 2015, or let Yahoo sell the stake in a future IPO27 of Alibaba Group.”
Notes From: Duncan Clark. “Alibaba: The House That Jack Ma Built.” iBooks.
