Alibaba, the big Chinese e-commerce company is 39% owned by Yahoo! Inc. (NASDAQ: YHOO). That has been OK for Alibaba; Yahoo! has not taken any role in running the company. But, the firm and the Chinese government are a little worried that Microsoft Corp. (NASDAQ: MSFT) will not see it that way if it buys Yahoo!
According to The Wall Street Journal (subscription required), "Alibaba has already been contacted by Chinese regulators seeking information on how it could be affected by a Microsoft purchase." The concern is perverse for two reasons.
China thinks nothing of allowing its sovereign funds to put capital into U.S. financial companies. Congress has already begun to worry in public that the Chinese might exert unwanted pressure on the managements of some of Wall Street's biggest companies. The Chinese cannot have it both ways, buying into American businesses while setting limitations on investments in its country.
What is even more obvious is that one solution is to have Microsoft simply enter into a legal agreement that makes its shares in Alibaba non-voting. This allows the big software company the advantage of an investment that will probably grow in value, and one that it will probably eventually sell back to Alibaba or even to the Chinese government.
Thursday, February 21, 2008
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