Alibaba's IPO is the most anticipated of the year, but the US-China Economic and Security Review Commission (USCC) has issued a report warning investors that the variable interest entity (VIE) structure commonly used by Chinese internet stocks to list in the West involves more legal risk than they may realize.
VIE structure is meant to bypass Chinese regulations
Technically, Chinese internet stocks aren’t allowed to have foreign investors. China restricts strategic and emerging industries (SEIs) and other politically sensitive industries from foreign ownership, and it’s almost impossible for a major internet company to get permission to list outside China. VIEs are a workaround that creates a chain of contracts that connect...
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