A communist dictatorship forced a multinational e-commerce company into making a very unprofitable transaction on Sept. 23.
The Chinese Communist Party (CCP) allegedly pressured Alibaba Group into disposing its shares in Mango Excellent Media (MEM), swiftly ending the company’s first class-A shareholding.
“[MEM received] a letter of recommendation on a request to exclude Ali Ventures from executing duties, under the commitment to Ali Ventures related to the lockup of shares transferred to the firm,” the target company said in a statement.
Hangzhou Alibaba Creative Investment Company, also known as Ali Ventures, agreed to transfer 93,647,857 shares, representing 5.01 percent of total share capital. Ali Ventures will no longer own MEM shares after the deal reaches financial close.
MEM organized a board meeting and a supervisory board meeting to discuss Ali Ventures’s proposal. The Board of Directors and Board of Supervisors agreed to relieve Ali Ventures of its obligations despite a 12-month divestment freeze.
Alibaba previously invested in MEM shares back in 2020, and the arrangement was to keep them for a year before reducing its shareholding. If Ali Ventures wishes to withdraw capital early, the general meeting of shareholders must review and vote on the matter. Concerned parties did not provide a thorough explanation about why Ali Ventures liquidated its shares before the minimum term ended.
MEM stock decreased to 41.31 yuan at market close on Sept. 23. Ali Ventures faces a floating loss exceeding 2.3 billion yuan, according to share price estimates at the time of publication.
Alibaba Group might reduce or divest shareholdings in Weibo and other media companies too.
“A lot of Alibaba’s investments are not a concern on their own,” a Beijing-based investor said.
Alibaba joined the film industry and developed a media empire, thanks to cloud computing technology and simplified major investment requirements.
The CCP began pressuring Alibaba Group to divest its media assets during March 2021. Beijing officials were surprised to see Alibaba extensively participate in the media sector, according to the Wall Street Journal.
State-run media outlets have increasingly criticized privately owned competitors, arguing private capital cannot dictate the media.