5 Reasons Why You May Want to Avoid Buying Alibaba Shares

In 2 days, on September's 19th, you will be able to buy the shares of the huge Chinese company - Alibaba. Should you do it? Although Alibaba seems like it's going to be a major success, here are 5 things you should know before buying:

  1. Ownership. Alibaba is mostly controlled by it's board of directors. Regular share holders will have almost no influence, which is unusual and might be a problem later on.

  2. Fake Merchandise. Unlike Amazon, Alibaba doesn't own it's merchandise, it just connect between buyers and sellers. This caused some people to sell fake merchandise and it doesn't seem like Alibaba can find all of them to take them down.

  3. Conflict of Interest. Alibaba relies on a lot of different companies in order to make it work. For example, Alipay, the company that's in charge of Alibaba's payment system, isn't owned by Alibaba. That can be a real problem at some point if a conflict of interest will occour. 

  4. Unwise Purchases. Alibaba has made some very questionable purchases in the past, spending a lot of money buying companies that the investors don't like.

  5. You don't really buy Alibaba shares. To bypass some Chinese rules, Alibaba has made an arrangement with another company, which means that you don't buy share of Alibaba, but of the other company instead. The Chinese courts didn't approve this yet and it might become a problem in the future.

Look out for Yahoo, who owns %24 of Alibaba, which may see their share rise on September's 19th - the date of Alibaba's IPO (Initial public offering).



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