Yahoo's Case - Alibaba [Not Complete]

Yahoo! A Modern Day Tale of Alibaba

Case Overview

On 10 May 2011, Yahoo! Inc. (Yahoo!) indicated in its SEC filing that Alibaba Group Holdings Limited (Alibaba) had transferred the ownership of Alipay to a new entity controlled by Alibaba’s CEO Jack Ma. Yahoo! said in a press release two days later that it was not informed of the ownership transfer until 31 March 2011, several months after the alleged transfer completion date of August 2010. Alibaba fought back the next day, arguing that the ownership transfer had abided entirely to regulations and the board was informed beforehand of this impending ownership change1 Yahoo! shares fell as much as 7.3% to $17.20 on the initial announcement date, and lost more than 10% through the week2. While public reactions were divided, some fundamental questions inevitably surfaced in investors’ minds: whose side of the story should they trust? Who should take responsibility for the delayed disclosure? Who is trying to mislead the investors? The objective of this case is to allow a discussion of corporate governance issues such as board representation and structure, conflict of interest, board communication, decision making/authority as well as directors’ duties.

Background

Alibaba Group

Alibaba was founded in 1999 in Zhejiang Province, China. The founder Jack Ma Yun had a vision of connecting every businessman in China through the emerging Internet technology. By 2011, its flagship subsidiary Alibaba.com had grown into the biggest online business-to-business (B2B) marketplace in China, with a market share of approximately 50%. In 2007, Alibaba.com successfully filed for an Initial Public Offering (IPO) on the Hong Kong Stock Exchange. Alibaba also owns Taobao, the biggest consumer-to-consumer (C2C) online shopping platform in China; and Tmall, a dedicated business-to-consumer (B2C) platform.

One of Alibaba’s most successful developments was Alipay, a third-party online payment platform launched in 2004. It was...