On the whole, Alibaba's VIE structure is a real risk. Some have speculated that the CCP could ban VIEs, leaving Western shareholders holding the bags. This means that BABA shareholders have no vote, and no direct ownership in the company's assets. VIEs are not technically ownership claims on companies but contractual agreements to part of their profits. Either share represents ownership in a VIE, not the company itself. BABA shares are convertible to 8 shares of 9988. If you buy Alibaba as '9988' on the Hong Kong Stock Exchange, you own a stake in the VIE directly. If you buy BABA on the New York Stock Exchange, you are buying ADRs that in turn have a claim on the Alibaba VIE. When you buy stock in BABA, you technically don't own shares in Alibaba Group itself, but in an offshore shell company that has a claim to its profits. The company's status as a Variable Interest Entity (VIE). There's also more of a perennial "headwind" that investors are beginning to talk about: So BABA is facing some serious headwinds in 2021. China's tech crackdown has affected Alibaba, as it resulted in a $2.8 billion fine, and the lukewarm earnings results probably didn't help. The above are some commonly given reasons why investors are wary of Alibaba in 2021. The core eCommerce business grew sales by only 22%, far below expectations. The 34% growth in revenue not only missed but was largely thanks to the consolidation of a subsidiary. Investors mostly took the earnings news as a negative, selling the stock after they were announced. Its most recent quarter was mixed, missing on revenue but beating on earnings. It's in this environment that BABA finds itself today. Between the Chinese Communist Party's (CCP) tech crackdown and concern over the COVID-19 Delta Variant, there have been many headwinds. While American tech stocks have been rallying this year thanks to a string of earnings beats, their Chinese peers haven't been doing as well. Down 30% for the year, it has taken quite a beating. Michael Loccisano/Getty Images EntertainmentĪlibaba Group ( NYSE: BABA) stock has given investors a nerve racking ride in 2021.
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