Yes Erik --- Alibaba is COMPLETELY different. I think Mike *Glassman* was asking about stocks in general so I responded that way.
Alibaba "investors" (are they, or are they gambling) are really just investing in paper - they own nothing. That doesn't mean they can't make a ton of money over time if the SHARES (paper) continue to go up. I look at those things like this --- if I bought Ford (F) and it went to zero... I wouldn't have any chance of recovery - it would just turn into wallpaper. So I don't really get too caught up in the legal aspects. If you do - that might hold you back from making some money. A loss will be a loss... and a gain will be a gain.... regardless of the silliness of the investment.
On the opening day -- there was 25 BILLION dollars on that bet. WOW! Just WOW!
Quote:
Originally Posted by ErikLS2
It's a little tricky with BABA shares, and a bit more risky. Don't ask me to explain it but they're called Variable Interest Entities (VIE). Copied this from wsj.com:
The bigger concern is that, because China's government restricts foreign ownership of Chinese assets, Alibaba shareholders won't actually own the company. Instead, through a so-called variable interest entity (VIE), they will only own shares in a shell company with a contractual claim on Alibaba's profits. Many Western-listed Chinese firms get around Beijing's foreign-ownership rules this way. But Beijing could close this loophole at any time, and it gives shareholders limited recourse against abuses by company founders.
VIE "contracts are only binding and enforceable if Chinese courts are willing to uphold them," warned Congress's U.S.-China Economic and Security Review Commission in June. "For U.S. investors, a major risk is that the Chinese shareholder . . . will steal the entity, ignoring the legal arrangements on which the system is based."
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As it happens, the most notorious VIE controversy involves Alibaba and Mr. Ma, who in 2011 separated Alipay from the rest of the company without board approval. He said Chinese regulations required him to make the move, but it infuriated Alibaba's minority owners Yahoo YHOO +1.03% and Softbank. 9984.TO -4.24% While a settlement was negotiated, trust between the company and investors was damaged.
Alibaba is thus a microcosm of today's Chinese economy: Hundreds of millions of consumers and businesses are benefiting from rising opportunity, but the commanding heights remain opaque, politicized and shaky. Caveat investor.
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