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Heading out the door, Trump considers ban of Americans’ investment in Tsai’s Alibaba

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Milken Institute 2019 Global Conference Photo by Michael Kovac/Getty Images

The Wall Street Journal reports that the Trump Administration is considering a ban on U.S. investments in China’s two most valuable companies, Alibaba and TenCent. Alibaba was co-founded by Nets owner Joe Tsai and is the source of most of his wealth. Such a ban would almost certainly lead to a significant drop in his net worth.

The Journal reported...

Tencent and Alibaba are China’s two most valuable publicly listed companies, with a combined market capitalization of more than $1.3 trillion and scores of American mutual funds and other investors holding their shares. Alibaba’s New York-listed American depositary receipts fell more than 5% on Wednesday.

The news caused Alibaba to drop five percent in U.S. trading Wednesday. There’s no indication that Alibaba’s problems have affected Tsai’s sports properties, including the Nets, Liberty in pro basketball and San Diego Seals in pro lacrosse as well as Barclays Center.

The ban — which could be instituted as early as Monday — is not yet a certainty, suggested WSJ’s Dawn Lim, Jing Yang, Gordon Lubold and Alexander Osipovich. And in fact, the Treasury Department has not signed off on the plan. Moreover, the incoming Biden Administration would not be bound by the Trump move. Biden will be inaugurated January 20.

The State and Defense departments have debated with the Treasury whether adding Alibaba and Tencent to the U.S. blacklist would have wide capital-markets ramifications, people familiar with the matter said. The plan remains under discussion and might not proceed, the people added.

Ironically, Alibaba is also under significant pressure from the Chinese government who first stopped an initial public offering of Alibaba’s subsidiary Ant Financial, after Tsai’s longtime friend and business partner, Jack Ma, criticized the Chinese banking system. Since that comment, Ma has not been seen in public and has not posted on social media, causing rumors that he had disappeared. (CNBC reported two days ago Ma is merely “laying low.”)

Since the move to halt the Ant IPO, Chinese regulatory authorities announced an investigation into Alibaba which would limit the company’s power ... and possibly lead to some government ownership, WSJ has reported. The Huangzhou-based company is privately owned. with stock sold on both the New York and Hong Kong stock exchanges.

Tsai’s net worth has been buffeted by the various crosswinds in Beijing and Washington in recent months. After hitting $16 billion on October 27, per Bloomberg News, Tsai’s net worth has dropped to $12.6 billion as of Thursday morning. He has gone from the 100th richest person in the world to the 170th.

One U.S. government analyst, asked about the Chinese government’s relationship with Alibaba, said the Chinese government, while proud of Alibaba’s success on the world stage, is also suspicious of it because it is considered a “western company.” The Journal reported that the Trump Administration has “concerns” about Alibaba sharing Americans’ data with Chinese state security organs.

While Alibaba and Tencent aren’t controlled by the Chinese government, the State Department and Pentagon have long voiced concerns that the companies could be coerced to share data on U.S. citizens and businesses, potentially serving as a conduit for Beijing to extend its influence.

Alibaba had no comment on the proposed rules. Tsai, who unlike Ma, has continued to use social media, even commented Wednesday on the Nets win over the Jazz ... and the insurrection at the U.S. Capitol.

Tsai while Chinese by heritage, is a native of Taiwan and a citizen of Canada. He was educated in the New York metropolitan area, at Lawrenceville School in New Jersey and Yale University and Yale Law School in Connecticut. His wife and children are all U.S. natives.