I was reading an article on the economist about how Alibaba was under investigation by the S.E.C. and bla bla bla the same content that's been rammed into my ears all the time how no one trusts the Chinese and their accounting practices are sketchy.
But I came across an interesting thought in the comments section, which was when Alibaba spun-off it's transaction services part Alipay, the company did not properly compensate Yahoo for that business transaction (Alibaba selling Alipay to another company controlled by Jack Ma).
Traditionally in school, from what i learned in financial accounting 100, a stock is a representation of a proportional ownership to a company. Meaning that it has rights to access the cash flows of the company's earnings as well as rights to access voting rights for major strategic decisions (assuming we are not talking about non-voting equity).
When a company such as Yahoo owns 40% of Alibaba, and Alibaba sporadically decides to sell off a proportion of itself, then should Yahoo be compensated for that transaction? And how? Is Alibaba expected to distribute excess dividends? or throw at Yahoo new equity to the company that bought Alipay?
