i don't like the trend of the new tech companies founders controlling voting shares as in Facebook and Google. But this one has that and the absence of real ownership.

According to Market Watch:

"And Alibaba’s position in the market is no doubt appetizing: For instance, its Taobao and Tmall sites are said to account for 80% of all Chinese online retail traffic, which in turn was valued at close to $300 billion in 2013, according to a Wall Street Journal report citing iResearch data.

The problem, however, is that investors buying New York-listed shares in Alibaba won’t actually have title to Taobao, Tmall or any of Alibaba’s Chinese assets.

This is because Chinese law forbids foreigners from owning strategic assets in the country, and Alibaba wouldn’t be able to keep its licenses if, say, a U.S. hedge fund directly bought into the e-commerce leviathan.

To get around this, Alibaba is using a structure known as the “variable-interest entity,”........

....Basically, the Alibaba stock will buy you a stake in a Cayman Islands-registered entity which is under contract to receive the profit from Alibaba’s lucrative Chinese assets but will not actually own them.

And who will own them? Alibaba founders Jack Ma and Simon Xie, according to a post on the New York Times Dealbook blog.

“Such a structure means that if shareholders in the United States want to enforce their rights, they will have to do so based on contracts between a Cayman Islands entity and a mainland China-based one,” writes Ohio State University professor Steven Davidoff in the Dealbook blog.

None of this is to imply that Ma and Xie plan to rip off investors, pulling the Taobao out from under them, so to speak. The real risk appears to be on the shaky legal foundations of the variable interest entity (VIE) structure.

In its Securities and Exchange Commission filing, Alibaba admits that while its Chinese lawyers at Fangda Partners believe the VIE conforms to China’s laws, this could change.

“It is uncertain whether any new PRC [People’s Republic of China] laws, rules or regulations relating to variable-interest entity structures will be adopted, or if adopted, what they would provide,” the filing says."

http://www.marketwatch.com/story/beware-alibaba-ipo-isnt-really-selling-alibaba-2014-05-07