Tags: Mobius | investors | Alibaba | China

Mark Mobius: Investors Should Think Twice Before Jumping Into Alibaba

By    |   Wednesday, 17 September 2014 01:46 PM

Explosive demand for its initial public offering has led Chinese Internet titan Alibaba Group to raise the target price for its shares.

But star emerging-market investor Mark Mobius, executive chairman of Templeton Emerging Markets Group, warns investors to stay away from the company.

Alibaba's structure means that shareholders will have almost no say in the management of the company and tenuous legal standing if it encounters turmoil, Mobius tells CNNMoney.

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Those factors create a "very dangerous situation" for shareholders, he argues.

Alibaba's partners control the board of directors' membership. And the company has a bizarre ownership structure to circumvent China's stringent foreign investment regulations that makes it difficult to sue.

"You'd have to go to a Chinese court, and it would be very difficult, maybe even impossible," Mobius notes. "The founders have control of the key assets of the company, and if something goes wrong there's nothing you can do about it. This is the bottom line.

"My advice for investors is to be very, very cautious and look at the fine print, and don't . . . get involved in these things if [you're] not going to have any recourse," he adds.

Not everyone is turned off by the company's structure.

"Alibaba has a leading position in an e-commerce sector that we can't miss, and the valuation with the current price range is reasonable," Alex Au, managing director of Alphalex Capital Management, tells The Wall Street Journal. He says he's going to try buying shares in the IPO.

Alibaba raised its IPO target to $66 to $68 per share, up from $60 to $66 Monday. The offering is slated for Friday.

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Explosive demand for its initial public offering has led Chinese Internet titan Alibaba Group to raise the target price for its shares.
Mobius, investors, Alibaba, China
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2014-46-17
Wednesday, 17 September 2014 01:46 PM
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