Jack Ma Yun and Joe Tsai pledge Alibaba shares for investment bank loans, report says

Business | 2 Jul 2021 4:16 pm

Billionaires Jack Ma Yun and Joe Tsai Chung-hsin have pledged chunks of their combined US$35 billion stake in ecommerce group Alibaba (9988) in exchange for significant loans from investment banks, company documents show, Financial Times reported.

The share pledges, made to banks including UBS, Credit Suisse, Goldman Sachs and others, were undertaken by offshore companies controlling more than half of the two billionaires’ stakes in Alibaba, which totalled 5.8 percent as of December.

In share pledging, banks accept stock as collateral for loans but the borrower retains ownership of the shares.

The amounts of most of the share pledges were not disclosed in the documents but the pair have repeatedly turned to borrowing against their stock since Alibaba listed in the US in 2014, the documents seen by the Financial Times show. 

Ma and Tsai, Alibaba’s two largest individual shareholders, have used the loans to unlock vast personal fortunes tied up in the group’s shares. Global banks have extended a wide variety of credit to Ma and Tsai.

Tsai’s Gulfstream 650ER private jet is mortgaged to Credit Suisse.

The Swiss bank, which brought Alibaba to market, also extended credit during the IPO run-up to an offshore shell company later linked to Ma’s purchase of a lavish house in Hong Kong’s elite Peak district and a new plane the same model as Tsai’s. 

Share pledging carries risks and is limited by most US companies. Any forced selling of executives’ pledged stock can exacerbate the fall of a company’s share price.

This can be precipitated by margin calls, when borrowers must pay back loans from brokers or forfeit stock.

Credit Suisse, Nomura, Morgan Stanley, UBS, Mitsubishi UFJ Financial Group and Mizuho lost more than US$10 billion this year when they were forced to liquidate positions in US-listed companies held by family office Archegos after it failed to meet margin calls.

Alibaba said Ma “and his affiliates” currently did not have any loans outstanding collateralised by Alibaba shares while Tsai’s loans outstanding backed by shares were “easily manageable” with “prudent loan-to-value ratios to provide [a] substantial cushion against triggering a margin call.”

The company said pledging shares for loans was part of “ordinary financial planning to provide liquidity and diversification without having to sell shares in Alibaba.” 

Ma stepped down as executive chair of Alibaba in 2019 while Tsai remains executive vice-chair.

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