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How Yahoo! Inc. (YHOO) Was Cheated by Alibaba Group Holding Ltd (BABA)

It was not so long ago that Yahoo! Inc. (NASDAQ:YHOO) was blindsided by Alibaba Group Holding Ltd (NYSE:BABA) when it tried to sell Alipay without breaking the news to its major stakeholders. Peter Thiel, co-founder of PayPal and author of  “Zero to One”, reminded investors about this issue on CNBC.

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While explaining how Chinese companies can be dodgy for investors he cited the example of the dispute between  Yahoo! Inc. (NASDAQ:YHOO) and Alibaba Group Holding Ltd (NYSE:BABA) in 2011.

“[…] China has been very off limits for US investors, even Yahoo! Inc. (NASDAQ:YHOO) had a somewhat mixed experience where the Alipay subsidiary got confiscated and you know Alibaba came with fourty thieves as far as Yahoo! Inc. (NASDAQ:YHOO) was concerned,” said Thiel.

The hype around the world’s biggest IPO is reaching  unfathomable proportions and everybody is crying ‘underpriced’  at the IPO price range. Thiel said that this makes his contrarian instinct say that there might be something fishy about the IPO.

The CNBC team also drew parallels with Facebook Inc (NASDAQ:FB)’s IPO which also had an insurmountable hype around it but was far from a success as an IPO. The stock price plunged instead of kicking off, although the stock is in pretty good shape now.

Given this scenario, won’t it be a better decision to buy the Alibaba Group Holding Ltd (BABA) stock a few weeks later after the initial public offering? This risk averse perspective is also more suited with the shady side of the private Chinese internet company that Thiel drew attention to, namely the Alipay dispute.

The discussion also touched upon the presence of companies like Alibaba in Silicon Valley since it has already opened up an office there. On this note Thiel agreed that in future he expects the Chinese companies to compete even more aggressively in the technology sector.

Currently, major stakeholders in Alibaba Group Holding Ltd (BABA) are Soft Bank (34%) and Yahoo! Inc. (NASDAQ:YHOO)  (23%).

Disclosure: none

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