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Technology Stocks : Alibaba Group Holding Limited

BABA 179.98

+1.8%

3:59 PM EDT

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To: Burryville18 who wrote (839)	2/24/2023 7:43:24 AM
From: Sun Tzu	3 Recommendations Recommended By Glenn Petersen kidl TimF Read Replies (1) of 882

The biggest problem I have with any "Chinese stock" is lack of shareholder representation. When you buy a Chinese stock, be it BABA or anything else, you are not investing in a company or owning a piece of the business. Rather you are buying a piece of an arms length proxy called a VIE. Until few weeks ago, VIE was a l loophole that China had not really approved of. But recently China has begun to formalize how VIE could work. Even so, the structure remains risky. If you cannot vote for the directors, and a company may not be purchased, and it has zero obligations to buy back stocks or pay dividends, then what are you really buying? You are buying on faith. And this faith carries risks separately from the business and geopolitics risk. The price of the risk will be reflected in the stock value. Which is why the Chinese stocks will always be at substantially lower valuations than their American counterparts. This is why superficially Chinese stocks seem like a great value. But the gap in the valuations is the price of the VIE risk + the political/geopolitics risks.

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