There is much bigger news about Yahoo today than David Einhorn selling his stake.
A couple of days ago on his blog, Bill Bishop posted some details about an upcoming interview between Jack Ma and China Entrepreneur Magazine.
The interview is the newest example of Ma going out of his way in the Chinese media to defend his actions in transferring Alipay out of Alibaba Group without Yahoo!’s (YHOO) or Softbank’s consent. He previously had spoken out at length to Caixin Magazine and done an extensive press conference at the company’s headquarters in Hangzhou.
This newest interview was the most outspoken yet for Ma. Beyond Bill’s highlights in his post was a SlideShare document with the full Chinese and English translation transcript — 23 pages in all. Some of the most striking language was in that document.
This morning, I noticed the post had been updated. Here was his comment at the bottom of the new post:
UPDATE: I removed the full text of the Jack Ma interview and English translation at the request of China Entrepreneur Magazine. They did not want the full text online anywhere but their own site, and apparently Yahoo and Alibaba were upset at the translation and the portrayal of some of the parties involved. The real issue was probably not the translation but what Jack Ma said. As best as I can glean the Alipay compensation negotiations are not close to completion. Alibaba is doing its own translation, to “clean up” what Jack Ma said. If there are discrepancies that appear to change what was said I will update again.
So, reading between the lines of Bill’s comments, I have to believe it’s more from Yahoo!’s side that they objected to the content of the English translated 23 pages, rather than Alibaba, since Jack Ma is the guy who gave the full interview in the first place.
I read the full post a couple of days ago, included the translation that has now been removed and luckily made a few notes. Here’s a summary of the text that was there and which is no longer there now:
- In June 2009, Alibaba Group’s board transferred 70% of Alipay from the Group to a Caymans-based entity controlled mostly by Ma. This Caymans entity had a Variable Interest Entity (VIE) relationship with the Group, meaning that Yahoo! and Softbank still indirectly owned Alipay
- On June 21, 2010, the People’s Bank of China (PBoC) released rules for Chinese companies in the payment services business
- On August 6, 2010, the final 30% stake of Alipay was transferred over to the Caymans VIE
- According to Ma, the Group board approved both transfers
- On January 26, 2011, the PBoC faxed Alibaba Group asking them to declare if they had a VIE connected to Alipay. Ma states that it was understood that if the Group had a VIE, it would not receive a government license because they do not want any foreigners controlling something strategic like a payments company
- Ma says he had 3 choices: (1) keep the VIE and hope the government changed its mind but risk having them shut down Alipay, (2) maintain the VIE but lie, or (3) terminate the VIE to comply with the government. He chose the latter but claims Softbank’s Son wanted him to do #2 and lie.
- Yang couldn’t make a decision because all of the options would make him look bad to his shareholders. So he abstained from the decision.
- Ma on Son: “he’s the best negotiator in the world and the world’s biggest cheapskate.”
- Ma on Son: “If Ali Group had listened to more than 30% of Sun’s advice on business and operation, this company would have died a long time ago. A lot of his advice was stupid.”
- Several people approached Ma last year about buying a stake in Yahoo but Ma declined due to “kindness”. The magazine speculated that he might not want to own a stake in a company controlled by Son.
- Ma says he did have “special private communication” with the PBoC prior to the rules coming out.
- On the Alibaba Group board: since setting up the board in 2005 “not one decision has been approved by the board. A lot of things have been discussed outside of the board and the board have come to an agreement.”
- On whether there could have been a better solution if there had been more time: “this matter wouldn’t have even been approved with ten times the time. Why? It has to do with the ass-brains of these two. [NB See the update at the bottom of this post for some clarification on what an "ass-brain" is in the original Chinese.] Sun wants to benefit Softbank and Yahoo wants to benefit Yahoo, and they doesn’t care who’s going to take responsibility for this company.”
- On making his unilateral decision: “I admit that this decision isn’t the most perfect one, but it’s the only answer. I’m not saying I’m correct, I’m just saying I think i’ve done what I believe to be right.”
- On whether he should have lied to the government as Son wanted: “I’m almost 50, am I supposed to go and do something illegal?”
- When asked if Yahoo was lying about not knowing about the transfer of shares: “What do you think? Every time we have a board meeting there are minutes taken. Them saying that is so they can say to their shareholders: ‘This is Ma’s responsibility, don’t blame me.’ In reality, it’s giving me more pressure and bargaining chips in negotiations.”
- On Yahoo’s delay between March 31 and mid-May when they revealed the share transfer in their 10Q: “When Yang received the forms, he should have immediately told the Yahoo shareholders, but he waited until May to tell them. So now, Yahoo’s US shareholders blame Yahoo, not us.”
- “Before, this fireball was in my hands, and they said nothing. I was falling all over the place, not knowing what to do, and now i’ve given it to them.”
- On the state of the relationship today between Ma, Son, and Yang: “We’re not really that split. We argue it out in the day then go for a drink in the evening.”
- On why Son is now quiet: “He never shows his cards, his negotiation tactic is never to show his cards, and to force you. He’ll force you into a corner without showing his cards. He still hasn’t shown his cards, he’s waiting for Yahoo to do it, because Yahoo’s bargaining position is worse than his. Sun’s thinking a lot harder than Yahoo, he’s a lot more crafty.”
- On what the compensation to Yahoo and Softbank for Alipay will be: “The compensation will be large, very large.”
Some other interesting points from the article:
- Although Yahoo invested $1 billion for its 40% stake in the Group in 2005, Softbank invested only $80 million (in 2 rounds) for its 30% stake
- Ma was surprised at the criticisms that have come his way from the “domestic press” in China
- Ma was reelected to the Softbank board on June 25th
- Ma claims the US government has been involved in this dispute since it started but then says he can’t say any more.
- Qihoo 360′s (QIHU) CEO, who used to be the CEO of Yahoo China, said “the shares Yahoo has in Alibaba are perhaps worth more than all of its own shares.”
What remains unanswered is why the Chinese government insisted that a VIE not be connected to a payments service. We still don’t know.
It seems that Ma does want to reform how he’s been portrayed within China. That’s the reason for all these interviews.
When will there be a deal and how much will it be for? We don’t know. It doesn’t sound imminent from this conversation. However, the fact that Ma is spending so much time defending his actions makes me hopeful that a resolution will be found.
I hope that Yahoo’s board reads what Ma has said and tries to be a little bit more “crafty” themselves for a change.
[At the time of publication, Jackson was long YHOO]
Read the full post here at Forbes.
[UPDATE: Some have complained they can't see this original post on Forbes, so it's now here. Also, I received an email from Iris Guan, the English Editor of China Entrepreneur, saying that I was welcome to report on the article. They simply made a few updates to the translation that originally appeared on Bill's blog. For example, when Ma refers to Yang and Son as "ass brains" that is a literal translation from a Chinese idiom. According to Guan, it actually refers to "seeing things from your position."]
Friday, July 08, 2011
There is much bigger news about Yahoo today than David Einhorn selling his stake.