Jack Ma Wishes He Kept Alibaba Private
Jack Ma is the richest man in China, founder of the e-commerce giant Alibaba. Recently, in remarks he made at The Economics Club of New York, lamented the additional complications and responsibilities that have accompanies his company’s going public in September 2014 (having previously raised capital through private placement). “If I had another life, I would keep my company private,” Ma said. In Alibaba’s IPO on the New York Stock Exchange, the tech company raised a record breaking $25 billion, but Ma said, “Now, after the IPO, it’s much worse.”
Alibaba began its public listing at $68 per share, resulting in a valuation of $168 billion—three times higher than competitor eBay. When stock became available, investors quickly drove the price up to $92.70 per share. Since then, however, market cap has fallen as the company has lagged Wall St.’s lofty expectations. Alibaba also suffered from regulatory problems when the Chinese government called out the company for carrying pirated, fake, and counterfeit goods coming into the country.
Would Ma and Alibaba have been better off raising capital by selling bonds, e.g. issuing a 144A private placement offering under SEC regulation D? Perhaps the company could have raised significant capital, but Ma would also be free from the level of public scrutiny and investor expectations that accompanied the IPO (private placement capital can also come hindered with less attention and fewer obligations, as outlined in the PPM when the capital is raised).
At the time of the IPO, Alibaba issued a 38-page prospectus (the public version of private placement memorandum, also known as PPM) outlining the risks to investors. Among the risks disclosed were general protections included in most prospectuses or private placement memorandums (PPMs) that protect the company against potential investor lawsuits. In Alibaba’s case, some of the risk disclosures related to the company’s location in China and the differences in corporate governance norms and requirements from the United States.
Despite any headaches that going public (vs. staying with private placement capital) bought, Ma recognizes that IPO route enriched him personally. He just isn’t happy with the consequences, acknowledging the additional responsibilities faced by the richest of the rich: “If you have less than $1 million, you know how to spend the money,” Ma said. “But once you top $1 billion, you’re obligated to spend your riches on behalf of the society.”
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