Dismantling Ali's Most Complex Interest Structure

Last week, Alibaba group updated its prospectus to the United States and updated a large number of information on the basis of the first edition.

This is the largest financing IPO in the history of the world. The cleverest minds in the world have designed the most complex trading structure for Ma Yun, an English teacher, who has locked the best interests of Ma Yun and his team.

The first edition prospectus gives the outside world a glimpse of Ali's vast empire territory, but it is still in a fog, and some information is not fully disclosed, leaving many questions behind. The new prospectus seems to have absorbed the upgraded version after "user feedback".

Previously, Ali did not disclose the data of the two main platforms of Taobao and Tmall separately, but packaged with Juhuasuan under the "China retail business", causing the outside world to speculate on its hidden motives, such as whether Taobao's number is not beautiful enough. The new version independently disclosed the two GMV (total transaction).

What is most concerned about is the design of the core system that determines the fate of Ali. In the Alibaba transaction structure design, the most crucial is still 27 partner's system design. Who is the first batch of partners? To be able to list, it often means that this is Ali's most powerful person.

In addition, who constituted the 9 member board? From the list of disclosures, Ali has the right to nominate the majority of directors, but only four. According to the new board's nomination rules announced in the new prospectus, it is totally unnecessary to worry about "minority" Ali.

In the new version of the prospectus, Ma also tried to answer the logic of the seemingly unorganized and fairies acquired before the listing. Before the listing, Ali bought and sold a basket of enterprises, making people shaking their heads and saying that they could not understand, and Ali's system became more and more complicated. According to the insiders, a large number of enterprises acquired by Ali did not seem to be particularly competitive and imaginative. It was just a fire for IPO before listing. In the updated prospectus, Ali reorganized the investment and acquisition companies and gave his own logic.

　　 Tmall chase Taobao

According to the latest disclosure, in the 2014 fiscal year (April 2013 -2014 March), Alibaba's total revenue reached 52 billion 500 million yuan, an increase of 52.11% compared with the same period last year.

The two figures look very beautiful, but the growth rate is obviously down compared with the previous years. The 2011 year-on-year growth in 2013 was 78.46%, 68.23% and 72.37% respectively.

Alibaba's revenue includes four parts, namely, China's trade, international trade, cloud computing and network facilities, and others. Among them, China's trade contributed more than half of its revenue in 2010, and then increased year by year, accounting for 85.96% of total revenue in 2014. This means that Alibaba is more and more dependent on the domestic market. To a certain extent, Ali's business philosophy has influenced a generation of Chinese. In turn, the domestic electricity supplier's explosive growth has also made the Empire of Ali.

But the year-on-year growth rate of domestic trade is not small. In 2014, it was 54.74%, which was about 106.27% of 2011, and it was also a major factor affecting total revenue.

In the Chinese market, Taobao and Tmall were disclosed as of the eight quarter of the first quarter of this year, GMV. It can be seen from the data that Tmall's GMV has maintained a very high growth rate in the last year, at 100%, while Taobao is declining. The second quarter of 2013 was 53.89%, only 32.29% in the first quarter of this year.

In the 1 quarter of 2014, Taobao GMV reached 295 billion, while Tmall GMV also reached 135 billion. In 2012, Tmall's GMV was about Taobao's 1/4.

According to one industry, Taobao has obviously increased. The advantage of Ali's business model is that its profits are still very high, but its biggest competitiveness is growth. Taobao's growth rate should have an impact on valuations.

In the 2014 fiscal year, Ali achieved a net profit of 23 billion 400 million yuan and a net interest rate of 44.57%, which is the highest in Alibaba history. In addition, the gross margin of Alibaba has changed little and stabilized at 70% to 75%.

The rapid rising platform effect and high exposure rate also reduce the marketing cost of Alibaba. But with the expansion of the scale of revenue, the total cost of Alibaba accounts for a significant decrease, especially in marketing expenses, accounting for 35.01% of total revenue in 2010. By this year, the ratio of marketing expenses to total revenue of Ali is only 8.66%.

　　 How to design the partner system of Ali

The partner system, which is considered to be an innovation in the corporate governance by Alibaba, is also the reason why Ali was rejected by the Hongkong stock exchange.

The core of the partnership system is equality. Each partner, one person, one vote, makes these partners, managers of Ali and Ali associated companies, able to work across bureaucratic levels to better manage Ali. Ali partners currently have 27 members, but this number is not unchanged. In order to keep the partnership system alive, new people will join each year, and entry and exit will be normal.

The AB share structure is not used by Alibaba as a more common way of ensuring control (such as Jingdong mall). AB shares control power on the founders' audience, but the founders are few and will eventually retire from the company. This plan was rejected by Ma Yun.

The partner system can accommodate a larger management team, while maintaining the founder's corporate culture while absorbing more visions of company managers.

Theoretically, the partnership system, including the entry of Alibaba for at least 5 years, will enable Ali to become a manager's company. The controlling power will be more stable. It will not be turbulent because of the change of the founder or other shareholders. But another concern is how to protect the interests of shareholders.

Among the first 27 partners, 22 came from Ali group, 4 from Ali small gold clothing, and 1 from rookie logistics. Among the 22 Ali executives, Peng Lei and Hu Xiaoming are also executives of small and micro gold clothes. This configuration can be seen in the Ali system of all parties have the right to speak.

The number of partners disclosed in the prospectus was 28, so outside curiosity was missing. According to previous disclosures, 22 of the 28 people came from Ali group and 6 from Ali related enterprises. Now, the number of partners has been adjusted to 27. Among them, the affiliated company Ali small micro (including Peng Lei) was selected to 5 people. It is speculated that the temporary "partner" should come from Ali Xiao Wei. The removal of a partner from 28 to 27 is probably due to the need to ensure that there is no uniform number of votes in the voting.

Among the partners, only Ma Yun and Cai Chongxin are permanent partners. Ma and Cai Chongxin can stay in partnership until they voluntarily withdraw or be removed by other partners. Yes, as long as the votes reach a majority, all partners, including Ma Yun and Cai Chongxin, can be removed.

These 27 partners are the most powerful people in Ali, and the fate of Ali. In addition to Ma Yun, Cai Chongxin, vice chairman of the board of directors of Ali and Peng Lei, chief executive officer of Ali Xiao Xiao, play a very important role in the chessboard of Ali.

Taiwanese Cai Chongxin joined Ali in 1999 as a member of the founding team. The returnees gave up hundreds of thousands of dollars in annual salary, followed by Ma Yun as CFO, and spent only five hundred yuan a month for a long time.

Cai Chongxin, with investment and legal background, led a series of capital operations in Ali's history, including the introduction of Softbank, the acquisition of YAHOO China and so on. Starting from the founding of Ali, Cai Chongxin is a member of the board of directors and is currently a director of the High German map and other companies invested by Ali. Ma Yun even said in public that I am most grateful to him (Cai Chongxin).

Cai Chongxin is also regarded as the invisible founder of the Ali empire. And Taiwan business week is estimated that this Ali completed IPO, Cai Chongxin's identity will be the same as Terry Gou.

Not only is Cai Chongxin, the 27 partner of Ali, who has many backgrounds and legendary names.

Some are business elite, and their career paths are steady and solid. As the chief financial officer of Ali, Wu Wei became the CFO of Ali's B2B Alibaba.com in 2007. He founded the company's financial system and sent it to the Hongkong stock exchange. In 2012, it also led its delisting. Before joining Ali, Wu Wei worked as a partner of KPMG Beijing, one of the four largest accounting firms, and served KPMG for 15 years.

At present, Wang Jian, the chief technology officer of Ali, is from academia. He was a professor of psychology at Zhejiang University. He worked in Microsoft Asia Research Institute in 1999 and joined Ali as chief architect in 2008.

11 of the 27 people are from the founding team. Peng Lei is considered to be the most powerful woman in Ali. From the beginning, most of the time Peng Lei was in the position of chief talent officer. In 2010, she served as Alipay CEO, and was appointed Ali small micro finance CEO in 2013. This month, Peng Lei was once again appointed the chief officer of Ali, the two important role of Ali.

Tong Wenhong, another partner, was also legendary, starting from Ali's receptionist. In the past 14 years, she is currently a representative of the rookie logistics of partners, and is chief operating officer.

　　 9 person Board of directors Set the mystery

The board of directors of Ali will eventually constitute 9 people, but it has disclosed only four members, including Ma Yun, Cai Chongxin, Softbank Sun Zhengyi and YAHOO Jacqueline D. Reses, and Jacqueline D. Reses will withdraw from the board of directors after listing Ali on the basis of the agreement.

The updated prospectus further disclosed two directors and four independent directors. Among them, two directors are Ali CEO Lu Zhaoxi and COO Zhang Yong. The four independent directors are Dong Jianhua, former chief executive of Hongkong, financial expert Guo Deming, Goldman Sachs J. Michael Evans and YAHOO Yang Zhiyuan.

There were various conjectures about Ali's invitation to Dong Jianhua as independent director. Ali's reason is to value Dong Jianhua's profound experience and strategic vision in business and politics. In addition, Ali also mentioned Dong Jianhua's experience in building and strengthening Sino US relations. Ali is listed in the US, which may also be a bonus. It is not unusual for politicians to become directors of listed companies. Gore, the former vice president of the United States, sits on the board of apple. Politicians are also rich in business background. Before becoming chief executive of Hongkong, Dong Jianhua was Hong Kong listed companies Orient Overseas CEO.

What is more subtle is that Hongkong's Ming Pao reported recently that according to the news close to the exchange, the Hongkong government and the HKEx (0388) have recently discussed the second invitation to invite Alibaba back to Hong Kong. The HKEx and Alibaba are still in the process of preliminary understanding, but it is not known whether they have started formal discussions. But Chen Jiaqiang, director of the golden hair office and Treasury Secretary, has repeatedly voicing the listing of multiple shareholding structures, or reflects that it pave the way for related discussions. Dong Jianhua's role as an independent director plays a role in his imagination.

Guo Deming was an independent non-executive director of the Alibaba.com board and chairman of the board of audit under the board. Alibaba.com was listed on the Hongkong stock exchange in October 2007 and delisted in July 2012. Guo Deming's role in Ali is the same as before. Like Wu Wei, Guo Deming is also from KPMG. He has 25 years of experience and was a partner in Hongkong. After the Enron incident, the SFC asked the board of directors of a listed company to set up an audit committee, and at least one director could be identified as a "financial expert". Guo Deming played the role in the board of directors of Ali.

Looking at the composition of the 9 members of the board, Ali accounted for only four seats, a minority. The reason why Alibaba has the right to nominate the majority of directors but does not exercise their rights is also quite curious.

But at least it's not worth worrying about. Prospectus It is mentioned that if any time, for any reason, a director nominated or appointed by Ali partner is a minority in the board of directors, Ali partner shall have the right to appoint a director to obtain a majority of seats. Since the situation can be reversed at any time, it is not so important to have a strong majority.

　　 Behind the scenes officers: Rothschild Family launch

Another highlight of the updated prospectus is that Ali reorganized the previous series of investment acquisitions, trying to clarify the train of thought.

The first edition prospectus only roughly classified investment and acquisition enterprises into mobile Internet, O2O, digital media entertainment, medical products and logistics. This Ali explained the investment strategy, and explained the reasons behind several masterpieces.

There are three objectives of Ali's investment acquisition strategy: to get users and improve user stickiness, improve user experience, expand products and services. Tactically, it starts with a small number of shares and carries out business cooperation. UC browser, high moral map, micro-blog is like this. In addition, Ali will support entrepreneurs' innovative products and technologies.

The investment of UC, Hengda and micro-blog meets the goal of Ali getting users and improving users' stickiness. According to AI data, in March this year, UC has 264 million active users in the world. After acquiring it, Ali can get these users. After years of rounds of investment, Ali held 66% stake in UC in April this year, and Ali traded 479 million dollars and 12 million 300 thousand restricted shares for the remaining shares this month. According to this estimate, UC's valuation is around us $3 billion.

The investment in Guangzhou Hengda's 1 billion 200 million yuan and 50% stake has enabled Ali to reach millions of Chinese fans and get potential marketing platforms.

In improving user experience, Ali invested in Haier, Yintai, Youku potatoes and micro-blog. Ali hopes to cooperate with Haier in distribution, installation and service, so as to improve customer experience in Taobao and Tmall. Investment in Yintai is an attempt at the new form of O2O, which users can consume online through mobile devices when shopping in a physical store.

In the end, the relationship with Ali's main business is not very close. They are classified as an extension of products and services by Ali. Youku potatoes, culture China and China digital media provide users with digital media entertainment anytime and anywhere. Gould map provides O2O and location-based services to users who constantly migrate to mobile terminals. CITIC in twenty-first Century helped Ali expand the business of e-commerce to the field of medicine.

The financing scale of Ali listing may create a historical record, and it can serve as an underwriter, not only to witness the history, but also to have a substantial underwriting fee. Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley, Citibank are lucky. According to foreign media estimates, if the listing of Ali raised 20 billion dollars, the commission can reach 400 million dollars, six banks will each share about 66 million dollars.

So who is the financial adviser for Ali's unprecedented listing? The famous European Investment Bank Rothschild group.

This is not the first cooperation between Ali and Rothschild.

As early as 2010, Ali wholly bought Vendio, an online retailer in the US, who was Rothschild, the financial adviser to that acquisition.

In 2011, Ali sought $4 billion in debt financing to buy YAHOO's 40% stake, and the adviser was also Rothschild.

It is reported that Rothschild group has participated in many famous transactions in Asia. In September last year, Hongkong tycoon Zheng Yutong joined the Hui Shan dairy industry in Hongkong, IPO, and Rothschild was the financial advisor of Zheng Yutong. Yao Yunren, finance director in charge of Ali listing, has also served as a banker for Rothschild in Hongkong.