How compatible is Alibaba Group Holding Ltd (NYSE:BABA) with the American investment scenario? Subsequent to the dream IPO that the Chinese online retail giant had on the New York Stock Exchange, doubts were raised by an American billionaire, Mark Cuban, as to its vulnerability towards insider trading courtesy of its communist origins.
It was on CNBC that the wealthy investor, who happens to own shares of the company, remarked that all it would take is one phone call with an implied threat to push Alibaba Group Holding Ltd (NYSE:BABA) into the realms of insider trading. What is probably worse is that because it is a Chinese company, it would be immune from stringent laws which govern insider trading in USA thus rendering it unreliable. He summed up his contention in the following comment –
“There’s not a problem with having a company in a communist country come in but you just have to realize that our insider trading laws are going to be ineffective and apply them the same way to United States companies.”
When pitched to the panel of Fast Money Traders on CNBC for debate, various opinions emerged but mostly experts agreed that Alibaba Group Holding Ltd (NYSE:BABA) was no different from any other capitalist venture and hence deserved a chance. Discouraging Alibaba would effectively send a wrong message to upcoming and budding entrepreneurs that new ventures faced an uphill task.
Motivation for the remarks made by Mark Cuban probably had its origin in the recently reported security concern pertaining to Alibaba’s online platform wherein it turned out that accounts of buyers and sellers were sufficiently exposed so as to facilitate hacking. That said, analysts agreed that it was still in nascent stages and hence should be granted the leeway to rectify its glitches.
Closing doors on Alibaba Group Holding Ltd (NYSE:BABA) would mean depriving the American investor of a lucrative opportunity and that is something which experts felt would be unfair.
This article has been written by Vinita Basu.