Alibaba: Jack Ma reduced business licenses control before announcing retirement

Alibaba Group Chairman Jack Ma smiles on the “Singles’ Day” global online shopping festival in Shenzhen, southern China’s Guangdong province Friday, Nov. 11, 2016.AP / Kin Cheung

• Alibaba founder and executive chairman Jack Ma announced last month that he will step down in September 2019.
• Nearly two months before announcing his retirement, Ma curtailed his control of Alibaba’s Variable-Interest Entities — which holds the company’s key China business licenses, the Wall Street Journal reported.
• The reduced role of Jack Ma in VIE is a positive sign for investors, analysts said.
• Watch Alibaba trade in real time here.

Alibaba founder and executive chairman Jack Ma reduced his control of the licenses needed to run the company’s key China businesses before announcing he would step down next year.

Last month, Alibaba said Ma will retire in September 2019, with CEO Daniel Zhang succeeding him in the role of executive chairman. Ma will remain a permanent member of the Alibaba Partnership, which consists of 36 members who serve in leadership roles across the company’s different business units.

Nearly two months before his retirement announcement, Ma was curtailing his corporate responsibilities by reducing his control of Alibaba’s Variable-Interest Entities, where he holds a controlling interest that is not based on the majority of voting rights, according to The Wall Street Journal, citing a regulatory filing on July 27. The VIEs hold Alibaba’s business licenses to operate websites in China, The WSJ said.

Ma’s ceeding of control of the VIEs shows that he will be less involved in Alibaba when he retires. This is a positive sign for investors as companies usually want VIEs in the hands of executives whose interests are aligned with those of the corporation, The WSJ said, citing experts.

The reduced role of Jack Ma in Alibaba’s VIE enhancement indicates a lower “key-man risk” in the company’s transition, Karen Chan, an analyst at Jefferies said recently in a note sent out to clients. 

At Alibaba’s annual investor conference in Hangzhou last month, Ma said his coming retirement is not a “sudden decision” and that he has been prepared for it for more than 10 years.

“Alibaba will last 102 years, and no one can be a 102-year CEO,” Ma said, according to Chinese Sina financial blog.

Alibaba shares were down 9% this year.

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