Jack Ma soccer buy does Alibaba investors a favour
By Peter Thal Larsen¬†
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Jack Ma‚Äôs decision to buy half of China‚Äôs most popular soccer club has done prospective investors in Alibaba a favour. The $192 million investment in Guangzhou Evergrande which the internet giant‚Äôs founder hatched over a drinking session this week won‚Äôt affect Alibaba‚Äôs value when it goes public later this year. But it offers a priceless insight into how the company works.
If Alibaba has a good strategic reason for owning a stake in the reigning Asian champions, Ma is keeping quiet about it. He joked at a press conference that he doesn‚Äôt know much about soccer. The investment is latest example of Alibaba‚Äôs scattershot approach to deal making, loosely designed to expand it into new areas like entertainment and health. In the last year it has bought stakes in an appliance maker, an owner of department stores, a mapping firm, an online video service and a Hong Kong-listed media group.
It‚Äôs not unheard of for companies to own sports clubs. Ted Turner used the Atlanta Braves baseball team to build his cable television business. Rupert Murdoch‚Äôs News Corporation owned the LA Dodgers baseball franchise and tried unsuccessfully to buy Britain‚Äôs Manchester United. Chinese conglomerate CITIC‚Äôs assets include a Beijing soccer club. Yet such investments have generally been disappointing from a financial perspective. Control of sports broadcasting rights has proved more lucrative.
Ma has demonstrated a knack for identifying big trends. His approach also doubtless owes a lot to China‚Äôs business landscape, where the need to maintain personal relationships, curry favour with officials or comply with ownership restrictions can force companies to take counter-intuitive steps. And Ma‚Äôs style is no more idiosyncratic than that of Facebook‚Äôs Mark Zuckerberg, who reportedly finalised the $19 billion acquisition of WhatsApp this year while eating strawberries with the messaging service‚Äôs founder.
The Guangzhou Evergrande investment also won‚Äôt change Alibaba‚Äôs valuation, which a Breakingviews calculator estimates at $113 billion. Yet it is invaluable in demonstrating how the company operates. After the initial public offering, a group of 28 senior executives led by Ma will nominate the majority of Alibaba‚Äôs board of directors. Would-be shareholders will be passive spectators with little power. The latest deal should leave them with no illusions about what to expect.