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Alibaba’s six-way business split is ‘a very share-holder friendly move’ to unlock value: Analyst

KraneShares CIO Brendan Ahern joins Yahoo Finance Live to discuss Alibaba's split and the impact of a potential TikTok ban.

Video transcript

SEANA SMITH: All right, well, let's take a deep dive into China's impact now on businesses because Alibaba's announcement coming after China's antitrust crackdowns led to a record 18.2 billion yuan fine for the tech giant after a probe found that the company abused its market dominance. Here with more on this, what it means for investors, we want to bring in Brendan Ahern, CIO of KraneShares. Brendan, it's great to see you. So just, first, your reaction to this announcement here from Alibaba, what it means for US investors.

BRENDAN AHERN: Yeah, I mean, Rachelle did a great job in describing what's going to be playing out, but it's really about, as the company states in the press release, it's about unlocking shareholder value. And it's interesting that Alibaba pursued a pretty similar strategy a few years ago when they relisted in Hong Kong that management felt like investors weren't properly valuing Alibaba's US listed China ADR.


So they relisted in Hong Kong. And the whole idea was allowing local investors in Asia to properly value it. And I think a very similar situation is playing out today, that management is basically telling us that investors aren't properly valuing the shares. And so they're doing a very shareholder-friendly move by unlocking this value.

DAVE BRIGGS: Good to see you, Brendan. Can't help but ask what is the deal with the reappearance of Jack Ma, and is there something with the timing here?

BRENDAN AHERN: Well, clearly, he was doing a lot more than just visiting a school in China, Dave, that clearly he was there as part of helping management navigate this. I think he's also, by doing this in a very public fashion, he's saying to the outside world that Alibaba is here. China is open for business. It also happens to be the China development forum where you have, obviously, Tim Cook, but also the CEO of Qualcomm, Pfizer, Johnson & Johnson, a whole host of US, as well as globally multinationals, are in China as we speak, and a sign that China is open for business post-zero-COVID removal.

SEANA SMITH: Is there still, though, going to be a lot of speculation just about whether or not this actually is a shift that is going to stick? Because we've heard some comments from Chinese regulators over the last couple of months. But I think there's lots of questions about whether or not this is actually going to change some of that perception.

BRENDAN AHERN: Yeah, I think-- I mean, ultimately, as the global economy slows, demand for China exports will slow. So the Chinese government is going to really emphasize domestic consumption because that's one of the few levers they can actually control. And where does domestic consumption happen in China? Well, it happens on e-commerce platforms such as Alibaba, where almost 20% of retail sales takes place. Obviously, competitors like JD and Pinduoduo are also heavily involved. So I think ultimately, the companies are very much aligned with top-down driven policy from China's government, which is raising domestic consumption in that zero-COVID world.

DAVE BRIGGS: Of course, there's another massive tech story when it comes to China, one that's just behind you on that whiteboard, pointing to your head ironically. You can figure that out later on the tape. We spoke to Wyoming Senator Cynthia Lummis about that, about the possibility of a TikTok ban. I want you to hear what she had to say.

- So I'm taking the attitude of watching the continued hearings within the House Energy and Commerce Committee and perhaps holding hearings in the Senate as well to try to figure out how we can either wall off customer data from the Chinese Communist Party, or if all else fails, ban TikTok. I'm continuing to gather information. I think I could eventually conclude that the only way to protect ourselves from TikTok in particular is to ban it.

DAVE BRIGGS: Now Senator Lummis a Republican, but there is bipartisan momentum towards an all-out band of TikTok, as you know, Brendan. What's your reaction to the possibility of that here? And what are they saying in China about this?

BRENDAN AHERN: Yeah, I mean, I think ultimately, there's a lot of issues taking place in the United States. We have three banks that failed in just over the course of a few short weeks. We've got a debt ceiling crisis on the horizon. And we're worried about dancing teenagers. The company has gone out of its way to show that the data is not-- it's held here in the United States. It just seems like a distraction technique from some much bigger, more serious problems in my opinion. I think ultimately, there will be a movement to try to ban it. It will go to the courts, as it did in the past. And it will-- likely, that ban will fail again.

There's a little thing in the Constitution called the First Amendment, and this legislative move to ban a company just because of it happens to be owned by a company in China, it just seems like we've kind of forgotten the constitutional rights here, as well as it's worth noting, Dave, that ByteDance on their board since a major US private equity firm.

The end reality is, if you try to ban TikTok, are you actually hurting many US institutional investors, such as pension plans, foundations, endowments that successfully invested in the company? I think it's something that really hasn't been examined, is the US ownership of TikTok.

DAVE BRIGGS: I'll have to debate this free speech rights against national security concerns over a cocktail in West Port. Brendan Ahern, good to see you, my friend.