‘Alibaba’ U.S. Shares (BABA) Are NOT In The Chinese Alibaba Company! You DO KNOW That … Right?
by Anura Guruge
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Yes, of course I have been following the Alibaba IPO. As an active, daily investor why wouldn’t I? Yes, I even, knowing very well that I wouldn’t get any (again), participated, futilely, in the Fidelity IPO bidding process.
But, this morning, listening to CNBC (and the CNN) I have been very disappointed and distressed that the media keeps on referring to today’s IPO shares, in BABA, as Alibaba shares. THEY ARE NOT.
The so called U.S. ‘Alibaba’ shares, i.e., BABA, are in a shadow-company, in the Cayman Islands, known as a ‘variable-interest entity’. This Cayman Island company is supposed to share-in and reflect the profits made by the real Alibaba company in China.
When you buy AAPL, CSCO, AMZN etc. you are actually buying shares of the real company.
Not so with the U.S. Alibaba, BABA, shares.
I just want you to be aware. I have known about this from the get-go BUT I am an investing junkie and spend a lot of time following the markets. So think of this as yet another Anura Guruge Public Service message.
I was, of course, willing to buy a share or two at the IPO price of $68. I am NOT going to rush in and guy it at $90 or higher. That would be stupid. I own at least two mutual funds that will buy the shares. So I am participating indirectly any way.
Plus I took the precaution of buying JD months ago and have YHOO of late (and I have already written a rather nice option against it).
I will, as I did with Facebook, wait and see. Actually I bought JD on the open market a few days after the IPO.