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Alibaba prospectus pdf

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Alibaba soundofheaven.info - Ebook download as PDF File .pdf), Text File .txt) or read book online. Apr 10, Form F-1 As filed with the Securities and Exchange Commission on May 6, Registration No. SECURITIES AND EXCHANGE. Apr 22, People walk at the headquarters of Alibaba in Hangzhou, Zhejiang province, April 23, [Photo/Agencies] HANGZHOU - Chinese.


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This summary highlights selected information contained in greater detail elsewhere in this prospectus. This summary may. May 18, (Exact name of Registrant as specified in its charter). Cayman Islands. ( Jurisdiction of incorporation or organization) c/o Alibaba Group Services. Alibaba Group will provide a hard copy of its annual report containing the audited consolidated financial statements, free of charge, to its shareholders and ADS.

We have received in the past, and we anticipate we will receive in the future, communications alleging that items offered or sold through our online marketplaces by third parties or that we make available through other services, such as our online music platform, infringe third-party copyrights, trademarks and patents or other intellectual property rights. The chart below depicts this network effect dynamic in our ecosystem. The directors and executive officers of the variable interest entities. Going forward we believe our financial results will become increasingly dependent on our ability to monetize the use of mobile devices to access our marketplaces. International commerce. Since our founding in In the future.

These assets included RMB Cayman Islands. The sale is subject to the receipt of certain regulatory approvals and other customary closing conditions.. Primarily involved in the operation of Alimama. Grand Cayman. Primarily involved in the operation of Alibaba.

Juhuasuan and AliExpress. Tmall and Juhuasuan.. For this reason. SoftBank BB Corp. Promotional slots on Juhuasuan may only be purchased by Taobao Marketplace and Tmall merchants. Our calculation of GMV for our China retail marketplaces includes shipping charges paid by buyers to sellers and excludes vehicle and property transactions with list prices exceeding RMB Taiwan and the special administrative regions of Hong Kong and Macau. Unless otherwise stated. Shenzhen and Guangzhou.

Our reporting currency is the Renminbi. This prospectus also contains translations of certain foreign currency amounts into U. On September The number of our ordinary shares that will be outstanding after this offering is calculated based on 2. Hong Kong Holdings Limited. We make no representation that the Renminbi or U. Except as otherwise indicated. GAAP as if they were our whollyowned subsidiaries.

We and certain selling shareholders have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an additional 26,, ADSs from us, up to an additional 18,, ADSs from Yahoo, up to an additional 2,, ADSs from Jack Ma and up to an additional , ADSs from Joe Tsai.

Each ADS represents one ordinary share. The depositary will be the holder of the ordinary shares underlying the ADSs and you will have the rights of an ADS holder as provided in the deposit agreement among us, the depositary and holders and beneficial owners of ADSs from time to time.

The depositary will charge you a fee for such an exchange. We may amend or terminate the deposit agreement for any reason without your consent. Any amendment that imposes or increases fees or certain charges or which materially prejudices any substantial existing right you have as an ADS holder will not become effective as to outstanding ADSs until 30 days after notice of the amendment is given to ADS holders.

If an amendment becomes effective, you will be bound by the deposit agreement as amended if you continue to hold your ADSs. We do not know if these individuals will choose to purchase all or any portion of these reserved ADSs, but any purchases they do make will reduce the number of ADSs that are available to the general public. Any reserved ADSs that are not so purchased will be offered by the underwriters to the general public on the same terms as the other ADSs offered by this prospectus.

We plan to use the net proceeds we will receive from this offering for general corporate purposes. We will not receive any of the proceeds from the sale of the ADSs by the selling shareholders.

You should carefully consider these risks before deciding to invest in our ADSs. We, our directors, independent director appointees and executive officers, the selling shareholders, SoftBank, the partners of the Alibaba Partnership and certain of the other holders of our ordinary shares have agreed with the underwriters to certain lock-up restrictions in respect of our ordinary shares or ADSs, or any securities convertible into or exchangeable or exercisable for any of our ordinary shares or ADSs, for various periods from 90 days up to one year after the date of this prospectus, subject to certain exceptions.

Immediately after the completion of this offering, a total of 2,,, ordinary shares representing approximately Summary Consolidated Financial and Operating Data The summary consolidated statements of operations data for the years ended March 31, , and and the summary consolidated balance sheet data as of March 31, , and have been derived from our audited consolidated financial statements included elsewhere in this prospectus.

Our financial statements have been prepared in accordance with U. The summary consolidated statements of operations data for the three months ended June 30, and and the summary consolidated balance sheet data as of June 30, have been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and include all normal recurring adjustments that we consider necessary for a fair statement of our financial position and operating results for the periods presented.

Our historical results for any prior period do not necessarily indicate our results to be expected for any future period. Revenue China commerce International commerce Cloud computing and Internet infrastructure Others Total Cost of revenue Product development expenses Sales and marketing expenses General and administrative expenses 1 Amortization of intangible assets Impairment of goodwill and intangible assets Yahoo TIPLA amendment payment 2 Income from operations Interest and investment income, net 5 Interest expense Other income, net Income before income tax and share of results of equity investees Income tax expenses Share of results of equity investees Net income Net income attributable to noncontrolling interests Net income attributable to Alibaba Group Holding Limited Accretion of convertible preference shares Dividends accrued on convertible preference shares Net income attributable to ordinary shareholders Earnings per share attributable to ordinary shareholders: Basic Diluted.

Pro forma earnings per share attributable to ordinary shareholders: Pro forma earnings per share attributable to ordinary shareholders is calculated as if our convertible preference shares had been converted into ordinary shares at the beginning of the period, or when the convertible preference shares were issued, if later.

See note 4 to our unaudited interim condensed consolidated financial statements for the three months ended June 30, We believe that adjusted EBITDA and adjusted net income help identify underlying trends in our business that could otherwise be distorted by the effect of the expenses that we include in income from operations and net income.

We believe that adjusted EBITDA and adjusted net income provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.

We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic corporate transactions, including investing in our new business initiatives, making strategic investments and acquisitions and strengthening our balance sheet.

We use free cash flow to manage our business, make planning decisions, evaluate our performance and allocate resources. A limitation of the utility of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in our cash balance for a reporting period. Adjusted EBITDA, adjusted net income and free cash flow should not be considered in isolation or construed as an alternative to net income, cash flows or any other measure of performance or as an indicator of our operating performance.

Adjusted EBITDA, adjusted net income and free cash flow presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data.

Adjusted EBITDA represents income from operations which excludes interest and investment income loss , net, interest expense, other income, net, income tax expenses and share of results of equity investees before i certain non-cash expenses, consisting of share-based compensation expense, amortization, depreciation and impairment of goodwill and intangible assets as well as ii one-time expense items consisting of the Yahoo TIPLA amendment payment and an equity-settled donation expense that we do not believe are reflective of our core operating performance during the period presented.

Free cash flow represents net cash provided by operating activities as presented in our consolidated cash flow statement less purchases of property and equipment excluding acquisition of land use rights for, and construction of, our office campuses in China and intangible assets, adjusted for changes in loan receivables relating to micro loans of our SME loan business and the Yahoo TIPLA amendment payment.

We present the adjustment for changes in loan receivables because such receivables are reflected under cash flow from operating activities, whereas the secured borrowings and other bank borrowings used to finance them are reflected under cash flows from financing activities, and accordingly, the adjustment is made to show cash flows from operating activities net of the effect of changes in loan receivables. The table below sets forth a reconciliation of our income from operations to adjusted EBITDA for the periods indicated:.

Income from operations Add: Share-based compensation expense Add: Amortization of intangible assets Add: Depreciation and amortization of property and equipment and land use rights Add: Impairment of goodwill and intangible assets Add: The following table sets forth a reconciliation of our net income to adjusted net income for the periods indicated: Net income Add: Impairment of goodwill, intangible assets and investments Less: Equity-settled donation expense Adjusted net income 1.

Three months ended June Changes in loan receivables. Purchase of property. Includes both cash and cash equivalents and short-term investments. Includes both current and non-current investment securities and investment in equity investees. The decrease from March Reflects i the automatic conversion of all of our convertible preference shares into Active buyers The following chart sets forth the number of active buyers on our China retail marketplaces for the periods indicated: Active buyers in millions Jun.

Risks Related to Our Business and Industry Maintaining the trusted status of our ecosystem is critical to our success. Our ability to maintain a healthy and vibrant ecosystem that creates strong network effects between buyers. We may not be able to maintain and improve the network effects of our ecosystem. Our ability to maintain our position as a trusted platform for online and mobile commerce is based in large part upon: Additional risks or uncertainties not presently known to us or that we currently deem immaterial may also harm our business.

The extent to which we are able to maintain and strengthen these network effects depends on our ability to: Any loss of trust in our platform could harm the value of our brand and result in buyers and sellers ceasing to transact business on our marketplaces as well as participants reducing the level of their commercial activity in our ecosystem. We have established a strong brand name and reputation for our ecosystem in China. Any of the following risks and uncertainties could have a material adverse effect on our business.

The market price of our ADSs could decline significantly as a result of any of these risks and uncertainties. The variety of technical and other configurations across different mobile devices and platforms increases the challenges associated with this environment.

We may not be able to successfully monetize traffic on our mobile platform. Consistent with our operating philosophy and focus on the long-term interests of our ecosystem participants.

If we are unable to attract significant numbers of new mobile buyers and increase levels of mobile engagement. An increasing percentage of our users are accessing our marketplaces through mobile devices. Our operating philosophy and interest in maintaining the health of our ecosystem may negatively influence our short-term financial performance. We face a number of challenges to successfully monetizing our mobile user traffic. We also make investments in new products and services that may not provide economic benefits to us in the short-term or at all.

If we fail to balance the interests of all participants in our ecosystem. User behavior on mobile devices is rapidly evolving. While a significant and growing portion of participants access our platforms through mobile devices.

Our ability to successfully expand the use of mobile devices to access our platform is affected by the following factors: Our ability to monetize our mobile user traffic is critical to our business and our growth.

We compete to attract and retain sellers based on our size and the engagement of buyers. We face a number of challenges that may affect our ability to sustain our corporate culture. We may not be able to maintain our culture. Going forward we believe our financial results will become increasingly dependent on our ability to monetize the use of mobile devices to access our marketplaces.

We expect mobile GMV as a percentage of total GMV will grow and that our monetization rates for mobile interfaces in the near term will be lower than those we have achieved from websites because to date our focus has not been on maximizing mobile monetization and we have only recently begun to increasingly monetize mobile activity.

If as we experience increased use of mobile devices for mobile commerce we are unable to monetize that increased use. If we are not able to maintain our culture or if our culture fails to deliver the long-term results we expect to achieve. We 27 http: We expect this trend will have a greater effect on our business to the extent that shopping on mobile devices displaces transactions that could have occurred on personal computers.

Since our founding. Although we do not believe the increasing use of mobile devices to conduct commerce has had an adverse effect on our business.

We face intense competition from Chinese and global Internet companies as well as from offline retailers. In particular. We compete to attract. If we are unable to compete effectively. For instance. Following the divestment of our interest in and control over Alipay. Jack Ma and Joe Tsai to govern our relationship with Alipay and its parent company. These regulations provided specific guidelines for license applications only for domestic PRC-owned entities.

These regulations stipulated that. We rely on Alipay to conduct substantially all of the payment processing and escrow services on our marketplaces. Alipay provides payment processing and escrow services that are critical to our platform through contractual arrangements with us. If we are not able to compete effectively. Our ability to compete depends on a number of other factors as well.

Accordingly we divested all of our interest in and control over Alipay. In June Although Alipay was prepared to submit its license application in early This action enabled Alipay to obtain a payment business license in May without delay and without any detrimental impact to our China retail marketplaces or to Alipay.

We also compete for motivated and effective talent and personnel. In light of the uncertainties relating to the license qualification and application process for a foreign-invested payment company. We established Alipay in December to operate our payment services.

The draft regulations. These provisions would. So long as payments are not made outside of the Alipay escrow system. If the draft regulations were to be adopted in their current or similar form. Alipay continues to provide payment services to us on terms preferential to us. Certain of these banks imposed lower limits on Alipay than on other 29 http: Pursuant to a commercial agreement we entered into with Alipay in connection with the framework agreement. The new draft of the regulations includes a number of proposed provisions relating to account management.

Buyers on our marketplaces could continue to pay for purchases through other means. Regulators and third parties in China have been increasing their focus on online and mobile payment services. The PBOC has indicated that the purpose of these provisions and other parts of the draft regulations is prudential and that final regulations. Once the accounts have been linked. Joint Circular 10 also requires commercial banks and other financial institutions in China to.

If we need to migrate to another third-party payment service for any reason. Although we rely on Alipay to conduct substantially all of the payment processing and escrow services on our marketplaces. As of June Small and Micro Financial Services Company.

These third-party payment services also may not provide escrow services. We rely on the convenience and ease of use that Alipay provides to our users. There can be no assurance that we would be able to reach an agreement with an alternative online payments service on acceptable terms or at all. If the quality.

We cannot predict whether these and any additional restrictions could be put in place that could have a material adverse effect on our marketplaces. Although we believe the impact of these restrictions has not been and will not be significant in terms of the overall volume of payments processed for our China retail marketplaces.

Following the divestment of our interests in and control over Alipay. We do not control Alipay or its parent entity. It is unclear how commercial banks and other financial institutions will implement the additional customer verification procedures or the requirement to adjust the transfer limits.

As noted in the immediately preceding risk factor. The provision of awards to our employees tied to the value of Small and Micro Financial Services Company is expected to enhance our strategic and financial relationship with Small and Micro Financial Services Company. The Internet industry is characterized by rapidly changing technology.

We understand that through the exercise of such voting power. Following such divestment and subsequent equity holding restructurings.

Jack will continue to control all of the voting interests in Small and Micro Financial Services Company and so long as Junhan and Junao hold a majority of the outstanding interests in Small and Micro Financial Services Company. Alipay sought to alter the terms of the agreement and to amend the terms of its arrangements with us in order to improve its business by modifying the payment processing terms or otherwise.

Jack Ma may not resolve such conflicts in our favor. Following the completion of our initial public offering and subject to the approval of our audit committee. The agreement. Other conflicts of interest between us. If we were to lose such preferential terms or if Alipay is unable to successfully manage its business.

We continue to invest significant resources in our infrastructure. If Alipay were not able to successfully manage these risks. If we are not able to continue to innovate or if we fail to adapt to changes in our industry. If those services do not generate the rate of return expected by the seller or rates that are competitive to alternatives.

Our marketplaces and platform generate and process a large quantity of personal. We may not be able to maintain or grow our revenue or our business. The laws. We primarily derive our revenue from online marketing services. Our privacy policies and practices concerning the collection. Any systems failure or security breach or lapse that results in the release of user data could harm our reputation and brand and.

These proceedings or actions may subject us to significant penalties and negative publicity. We face risks inherent in handling large volumes of data and in protecting the security of such data. Our marketing customers are typically brand owners. Our business generates and processes a large amount of data.

Any failure. As we expand our operations. Marketing customers do not have long-term marketing commitments with us. The price a merchant is willing to pay for online marketing services generally depends on its expected GMV. The changes and developments taking place in our industry may also require us to re-evaluate our business model and adopt significant changes to our long-term strategies and business plan.

Our failure to innovate and adapt to these changes would have a material adverse effect on our business. Adopting new products and upgrading our ecosystem infrastructure require significant investments of time and resources. Failure to maintain or improve our technology infrastructure could harm our business and prospects.

We are constantly upgrading our marketplaces and platform to provide increased scale. Maintaining and improving our technology infrastructure require significant levels of investment. In the three months ended June Increases in our costs may materially and adversely affect our business and profitability and there can be no assurance that we will be able to sustain our net income growth rates or our margins.

Increased investments in our business may negatively affect our margins. O2O services. Our strategic investments and acquisitions may affect our future financial results. If less GMV is transacted through such marketplaces or more GMV is generated from product categories with lower commission rates.

Potential changes in our strategy for monetizing our wholesale marketplaces could result in prolonged reductions in revenue from those marketplaces. We cannot assure you that we will be able to maintain our growth at these levels. If we experience problems with the functionality and effectiveness of our software or platforms.

Prospectus pdf alibaba

For our wholesale marketplaces. We have experienced significant growth in our profit margins and net income. Adverse consequences could include unanticipated system disruptions. These interruptions may be due to events that are beyond our control or the control of these logistics and delivery companies.

Our business depends on the performance and reliability of the Internet infrastructure in China. Our ecosystem depends on the efficient and uninterrupted operation of our computer and communications systems.

Any of these events could damage our reputation. Despite any precautions we may take. Our sellers use third-party logistics and delivery companies to fulfill and deliver their orders. The sellers on our marketplaces may not be able to find alternative logistics and delivery companies to provide logistics and delivery services in a 34 http: We do not have agreements with logistics and delivery companies that require them to offer services to our sellers.

The failure of telecommunications network operators to provide us with the requisite bandwidth could also interfere with the speed and availability of our websites.

Our ecosystem could be disrupted by network interruptions. If the prices that we pay for telecommunications and Internet services rise significantly. Although we have prepared for contingencies through redundancy measures and disaster recovery plans. We have no control over the costs of the services provided by the national telecommunications operators.

We may not have access to alternative networks in the event of disruptions. We cooperate with a number of third-party logistics and delivery companies to help our sellers fulfill orders and deliver their products to buyers. We have established a logistics information platform that is operated by China Smart Logistics. Substantially all of our computer hardware and our cloud computing services is currently located in China. If these logistics and delivery companies fail to provide reliable delivery services.

Almost all access to the Internet is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology of China. These logistics and delivery services could also be affected or interrupted by industry consolidation. Competition for talent in the PRC Internet industry is intense. If the logistics information platform we use were to fail for any reason. We depend on key management as well as experienced and capable personnel generally.

Even if we were to offer higher compensation and other benefits. In addition to the services provided to our ecosystem by Alipay and logistics providers. To the extent these third-party service providers are unable to provide satisfactory services to sellers on commercially acceptable terms or at all or if we fail to retain existing or attract new quality service providers to our marketplaces. If the products sold on our marketplaces are not delivered in proper condition.

Jack Ma. We will need to continue to attract and retain experienced and capable personnel at all levels as we expand our business and operations. As a result. The size and scope of our ecosystem also require us to hire and retain a wide range of effective and experienced personnel who can adapt to a dynamic. Any failure to attract or retain key management and personnel could severely disrupt our business and growth. Our future success is significantly dependent upon the continued service of our key executives and other key employees.

If third-party service providers on our ecosystem fail to provide reliable or satisfactory services. If we lose the services of any member of management or key personnel. Although we have employed significant resources to develop our security measures against breaches. If we are unable to motivate or retain these employees.

We do not have any agreements that require these third-party participants to provide services to sellers. Competition for these individuals could cause us to offer higher compensation and other benefits to attract and retain them.

Security breaches and attacks against our systems and network. As techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our thirdparty service providers.

Actual or anticipated attacks and risks may cause us to incur significantly higher costs. To effectively manage the expected growth of our operations and personnel. These transactions involve significant challenges and risks.

Acquisition and Strategic Alliance Activities. We have significantly expanded our headcount. We have recently acquired and invested in a significant number of businesses. At any given time we may be engaged in discussions or negotiations with respect to one or more of these types of transactions.

We must continue to effectively hire. Our business has become increasingly complex. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. If we are not able to manage our growth effectively. Our failure to manage the growth of our business and operations could harm us.

Cybersecurity breaches would not only harm our reputation and business. We cannot assure you that we will be able to effectively manage our growth or to implement all these systems. If we are unable to avert these attacks and security breaches.

If our new hires perform poorly or if we are unsuccessful in hiring. These efforts will require significant managerial. This expansion increases the complexity of our operations and places a significant strain on our management. We face risks relating to our acquisitions.

We have in the past and are likely again in the future to be subject to these types of attacks. Cyber-attacks may target us. Breaches of our cybersecurity measures could result in unauthorized access to our systems. We have received in the past. Any of these difficulties could disrupt our ongoing business. In the event that alleged counterfeit or infringing products are listed or sold on our marketplaces or our other services.

Prospectus pdf alibaba

We have been and may continue to be subject to allegations of civil or criminal liability based on allegedly unlawful activities carried out by third parties through our online marketplaces. We believe these procedures are important for purposes of investigating the allegations in question so that we can ensure confidence in our marketplace among buyers and sellers. Although we have adopted measures to verify the authenticity of products sold on our marketplaces and minimize potential infringement of third-party intellectual property rights through our intellectual property infringement complaint and take-down procedures.

We also have been and may continue to be subject to allegations that we were participants in or facilitators of such allegedly unlawful activities. We may be subject to allegations and lawsuits claiming that items listed on our marketplaces are pirated. Our significant acquisition activity has occurred recently.

When we receive complaints or allegations regarding infringement or counterfeit goods. PRC regulations pertaining to non-bank payment companies. We face risks with respect to fraudulent activities on our marketplaces and periodically receive complaints from buyers who may not have received the goods that they had purchased. Additional measures that we take to address fraud could also negatively affect the attractiveness of our marketplaces to buyers or sellers.

If the amounts in the fund are not sufficient. Although we have recourse against our sellers for any amounts we incur. Taobao Marketplace. If our sellers do not perform their obligations under these programs. This activity may harm other sellers by enabling the perpetrating seller to be favored over legitimate sellers.

In Any such illegal. A customer whose content is removed or whose services are suspended or terminated by us. In addition to fraudulent transactions with legitimate buyers.

SEC FILINGS

Although we dismissed the employees responsible for the incidents and have taken action to further strengthen our internal controls and policies with regard to the review and approval of seller accounts. The U. Trade Representative subsequently removed these marketplaces from the list. Negative publicity and user sentiment generated as a result of actual or alleged fraudulent or deceptive conduct on our platform or by our employees could severely diminish consumer confidence in and use of our services.

Continued public perception that counterfeit or pirated items are commonplace on our marketplaces or perceived delays in our removal of these items. Although we have implemented various measures to detect and reduce the occurrence of fraudulent activities on our marketplaces. Failure to deal effectively with any fraud perpetrated and fictitious transactions conducted on our marketplaces and other sources of customer dissatisfaction would harm our business.

Any costs incurred as a result of liability or asserted liability relating to the sale of unlawful goods or other infringement could harm our business. Trade Representative. None of these inquiries and investigations has resulted in significant restrictions on our business operations. Corporate transactions we or related parties undertake may also subject us to increased media exposure and public scrutiny.

Negative publicity about our executive chairman or other founders. We and Alipay are subject to regulation. The PRC government authorities are likely to continue to issue new laws. Changes in regulatory enforcement as well as tax policy in the PRC could also result in additional compliance obligations and increased costs or place restrictions upon our current or future operations.

These rules and regulations are complex. We also face scrutiny. These laws. We may increasingly become a target for public scrutiny. From time to time. Any such legislation or regulation could also severely disrupt and constrain our business and the payment services used on our marketplaces. The industries in which we and Alipay operate in the PRC. There is no assurance that we would not become a target for public scrutiny in the future or such scrutiny and public exposure would not severely damage our reputation as well as our business and prospects.

We process millions of transactions on a daily basis on our marketplaces. We have from time to time been subject to PRC and other foreign government inquiries and investigations. The increasing sophistication and development of our user base will also increase the need for higher standards of user protection. Alipay provides payment processing and escrow services through third-party service providers. In recent years. We may need to obtain licenses from third parties who allege that we have infringed their rights.

Although we have not in the past faced material litigation involving direct claims of infringement by us.

If these providers were to terminate their relationship with Alipay or otherwise cease providing services to Alipay. If Alipay fails to obtain and maintain all required licenses and approvals or otherwise fails to comply with applicable laws. Such claims. Any increased involvement in inquiries or investigations could result in significantly higher legal and other costs. These risks have been amplified by the increase in the number of third parties whose sole or primary business is to assert such claims.

Alipay is required to maintain a payment business license in the PRC. Third parties may claim that the technology used in the operation of our platforms or our service offerings. We may be accused of infringing intellectual property rights of third parties and content restrictions of relevant laws. We may be unable to attract a sufficient number of customers and other participants. We may face challenges in expanding our cross-border operations. We may receive close scrutiny from government agencies under the PRC Anti-Monopoly Law in connection with our business practices.

As we plan to continue expanding our existing cross-border operations into existing and other markets. The PRC government has prohibited the distribution of information through the Internet that it deems to be in violation of PRC laws and regulations. These constraints could include forced termination of any agreements or arrangements that are determined to be in violation of anti-monopoly laws. If any of the information disseminated through our marketplaces and websites were deemed by the PRC government to violate any content restrictions.

An adverse determination in any such litigation or proceedings could cause us to pay damages. We may become the target of anti-monopoly and unfair competition claims. The PRC Anti-Monopoly Law also provides a private right of action for competitors or users to bring anti-monopoly claims against companies.

The outcome of any claims. These constraints could also enable our competitors to develop websites. Any anti-monopoly lawsuit or administrative proceeding initiated against us may result in our being subject to profit disgorgement.

The expansion of our cross-border business will also expose us to risks relating to staffing and managing cross-border operations. Our revenue and net income may be materially and adversely affected by any economic slowdown in China as well as globally. The success of our business ultimately depends on consumer spending. The performance of our equity investees and of businesses. These measures have contributed to a slowdown of the PRC economy. Any continuing or worsening slowdown could significantly reduce domestic commerce in China.

Our results of operations fluctuate significantly from quarter to quarter which may make it difficult to predict our future performance. We may also introduce new promotions or change the timing of our promotions in ways that further cause our quarterly results to fluctuate and differ from historical patterns. The fourth quarter of each calendar year generally contributes the largest portion of our annual revenues due to a number of factors.

Our results of operations will likely fluctuate due to these and other factors. According to the National Bureau of Statistics of China. Due to intense competition in our industry. Our results of operations fluctuate significantly from quarter to quarter. We derive substantially all of our revenue from China. The global economy. The first quarter of each calendar year generally contributes the smallest portion of our annual revenues. The PRC government has in recent years implemented a number of measures to control the rate of economic growth.

An economic downturn. Our brand name and our business may be harmed by aggressive marketing and communications strategies of our competitors. If our growth slows. Operators of commerce marketplaces and platforms are subject to certain provisions of consumer protection laws even where such operator is not the seller of the product or service purchased by the consumer.

Intellectual property protection may not be sufficient in China or other countries in which we operate. Confidentiality agreements may be breached by counterparties. Even 43 http: We can provide no assurance that we will prevail in such litigation. We also enter into confidentiality agreements with our employees and any third parties who may access our proprietary information.

We do not maintain product liability insurance for products and services transacted on our marketplaces. To the extent our results of operations are below the expectations of public market analysts and investors in the future. If claims are brought against us under any of these laws. In the event that we resort to litigation to enforce our intellectual property rights.

Due to several high-profile incidents involving food safety and consumer complaints that have occurred in China in recent years. We may be subject to claims under consumer protection laws. Our quarterly and annual financial results will likely differ from our historical performance.

Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business. We may not be able to protect our intellectual property rights. We rely on a combination of trademark.

As a non-U. We have been involved in litigation relating principally to third-party intellectual property infringement claims. Tightening of tax compliance efforts with respect to the revenue or profit generated by our sellers could materially and adversely affect our business. Syria and Sudan are identified by the U.

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We may also be requested by tax authorities to supply information on our sellers. As our ecosystem expands. State Department as state sponsors of terrorism and are the target of comprehensive U. We may be subject to material litigation. In the case of Alibaba. We do not have physical staff or operations in these sanctioned countries. As all transaction fees on AliExpress 44 http: E-commerce in China is still developing. A significant number of small businesses and sole proprietors operating businesses through storefronts on Taobao Marketplace may not have completed the required tax registration.

An adverse determination in any such litigation or proceedings could cause us to pay damages as well as legal and other costs. We may suffer reputational harm and the price of our ADSs may decrease significantly due to business dealings or connections of sellers or buyers on our marketplaces with sanctioned countries.

Heightened enforcement against participants in e-commerce transactions including imposition of withholding obligations on us with respect to business or value-added tax could have a material adverse effect on our business.

In the case of AliExpress and Taobao Marketplace. After we become a publicly-listed company with a higher profile. PRC tax authorities may enforce registration requirements that target small businesses or sole proprietors on Taobao Marketplace and may request our assistance in these efforts. If we breach any of these covenants. We may be subject to liability for content on our websites and mobile interfaces that is alleged to be socially destabilizing. Certain U.

Regardless of the outcome of such a dispute or lawsuit. We may also be subject to potential liability for any unlawful actions of our customers or users of our websites or mobile interfaces or for content we distribute that is deemed inappropriate.

Any default under our credit facility could require that we repay these loans prior to maturity as well as limit our ability to obtain additional financing.

Such divestment initiatives may negatively impact our reputation and investor sentiment with respect to our ADSs may be materially and adversely affected.

Our ability to obtain external financing in the future is subject to a variety of uncertainties. We may require additional cash resources due to future growth and development of our business. We have incurred substantial indebtedness. Under PRC law. If our cash resources are insufficient to satisfy our cash requirements. It may be difficult to determine the type of content that may result in liability to us. Any negative investor sentiment as a result of such reputational issues may cause the price of our ADSs to decline significantly and may materially reduce the value of your investment in our ADSs.

We may need additional capital but may not be able to obtain it on favorable terms or at all. Failure to comply with the terms of our indebtedness could result in acceleration of indebtedness. This could leave us exposed to potential claims and losses. We do not maintain business interruption insurance or product liability insurance. Although from time to time. We are exposed to interest rate risk related to our indebtedness. We have obtained insurance to cover certain potential risks and liabilities.

We cannot assure you that our insurance coverage is sufficient to prevent us from any loss or that we will be able to successfully claim our losses under our current insurance policy on a timely basis. Any failure to raise needed funds on terms favorable to us. Such events could also significantly impact our industry and cause a temporary closure of the facilities we use for our operations. Any business disruption. Our operations could also be severely disrupted if our buyers.

An occurrence of a natural disaster. The occurrence of such a disaster or a prolonged outbreak of an epidemic illness or other adverse public health developments in China or elsewhere in the world could materially disrupt our business and operations. We are subject to interest rate risk in connection with our indebtedness. There can be no assurance that financing will be available in a timely manner or in amounts or on terms acceptable to us.

If we incur any loss that is not covered by our insurance policies. Our business could be materially and adversely affected by natural disasters. We may not have sufficient insurance coverage. Our operations could be disrupted if any of our employees or employees of our business partners were suspected of having the swine flu. This governance structure and contractual arrangement will limit your ability to influence corporate matters. Immediately after the completion of this offering.

These provisions could have the effect of delaying. The interests of the Alibaba Partnership may not coincide with your interests.

Jack Ma and Joe Tsai will agree to vote their shares including shares for which they have voting power in favor of the election of the SoftBank director nominee at each annual general shareholders meeting in which the SoftBank nominee stands for election. The nomination rights of the Alibaba Partnership will remain in place notwithstanding a change of control or merger of our company and. Our articles of association. The nomination rights of the Alibaba Partnership will limit your ability to influence corporate matters.

If at any time our board of directors consists of less than a simple majority of directors nominated or appointed by the Alibaba Partnership for any reason. For more information. To the extent that the interests of the Alibaba Partnership differ from your interests.

SoftBank will have significant influence over the outcome of matters that require shareholder votes and accordingly over our business and corporate matters. Foreign ownership of certain types of Internet businesses. Subject to certain exceptions. Under the terms of the voting agreement we expect to enter into. Immediately after this offering and assuming no exercise by the underwriters of their option to purchase additional ADSs. SoftBank will own approximately Except with regard to shareholder votes relating to the Alibaba Partnership director nominees.

Our articles of association contain anti-takeover provisions that could adversely affect the rights of holders of our ordinary shares and ADSs. These actions may be taken even if SoftBank is opposed by our other shareholders.

Alibaba Prospectus.pdf

SoftBank may exercise its shareholder rights in a way that it believes is in its best interest. SoftBank will also have the right to nominate one member of our board of directors.

The contractual arrangements give us effective control over each of the variable interest entities and enable us to obtain substantially all of the economic benefits arising from the variable interest entities as well as consolidate the financial results of the variable interest entities in our results of operations. Any of these events would have a material adverse effect on our business. If we or any of our variable interest entities are found to be in violation of any existing or future PRC laws.

In the opinion of Fangda Partners. Our contractual arrangements may not be as effective in providing control over the variable interest entities as direct ownership. For a description of these contractual arrangements. Although the structure we have adopted is consistent with longstanding industry practice. If the imposition of any of these government actions causes us to lose our right to direct the activities of any of our material variable interest entities or otherwise separate from any of these entities and if we are not able to restructure our ownership structure and operations in a satisfactory manner.

We rely on contractual arrangements with our variable interest entities to operate part of our Internet businesses in China and other businesses in which foreign investment is restricted or prohibited. It is uncertain whether any new PRC laws.

Alibaba soundofheaven.info | Alibaba Group | American Depositary Receipt

The imposition of any of these measures could result in a material adverse effect on our ability to conduct all or any portion of our business operations. While the significant majority of our revenue was generated by our wholly-foreign owned enterprises in fiscal year Fangda Partners has also advised us that there are substantial uncertainties regarding the interpretation and application of current PRC laws.

Any such foreign investor must also have experience and a good track record in providing value-added telecommunications services overseas. If the relevant variable interest entity or its equity holder or its successor.

If we had direct ownership of the variable interest entities. Pursuant to the call option. Under our contractual arrangements.

Although we have entered into call option agreements in relation to each variable interest entity. The variable interest entity equity holders may have conflicts of interest with us or our shareholders.

Any failure by our variable interest entities or their equity holders to perform their obligations under the contractual arrangements would have a material adverse effect on our business. If our variable interest entities or their equity holders fail to perform their respective obligations under the contractual arrangements.

We have also entered into equity pledge agreements with respect to each variable interest entity to secure certain obligations of such variable interest entity or its equity holders to us under the contractual arrangements. We also cannot assure you that these individuals will ensure that the variable interest entities will not breach the existing 51 http: We may lose the ability to use.

On the other hand. The directors and executive officers of the variable interest entities. The legal system in the PRC is not as developed as in some other jurisdictions. Jack has a duty of care and loyalty to our company and to our shareholders as a whole under Cayman Islands law. We control our variable interest entities through contractual arrangements and the business and operations of our variable interest entities are closely integrated with the business and operations of our subsidiaries.

Although the significant majority of our revenues are generated. PRC laws provide that a director and an executive officer owes a fiduciary duty to the company he or she directs or manages.

In the event we are unable to enforce the contractual arrangements. The contractual arrangements contain terms that specifically obligate variable interest entity equity holders to ensure the valid existence of the variable interest entities and restrict the disposal of material assets of the variable interest entities.

We cannot assure you that these individuals will always act in the best interests of our company should any conflicts of interest arise. The equity holders. Yuzhu Shi. The proposed financing facilitates our entering into strategic business arrangements with Wasu to pursue our strategy of expanding digital media offerings to our customers. Shi in conducting the business of the PRC partnership. Any adjustment of related party transaction pricing could lead to additional taxes.

A company controlled by Jack Ma serves as one of the general partners of this PRC limited partnership. The tax regime in China is rapidly evolving and there is significant uncertainty for taxpayers in China as PRC tax laws may be interpreted in significantly different ways.

If we cannot resolve any such conflicts of interest or any related disputes. There is substantial uncertainty as to the outcome of any such legal proceedings. The contractual arrangements with our variable interest entities may be subject to scrutiny by the PRC tax authorities.

If any such conflicts arise between Jack and Mr. Our net income may be materially reduced if our tax liabilities increase. There are uncertainties regarding the interpretation and enforcement of PRC laws.

Table of Contents Our ability to compete depends on a number of other factors as well, some of which may be out of our control, including:. If we are not able to compete effectively, the GMV transacted on our marketplaces and the user activity level on our platform may decrease significantly, which could materially and adversely affect our business, financial condition and results of operations as well as our brand. We rely on Alipay to conduct substantially all of the payment processing and escrow services on our marketplaces.

Alipay is our related company that provides payment processing and escrow services that are critical to our platform. In the twelve months ended December 31, , Pursuant to our agreement with Alipay, Alipay provides payment services to us on terms preferential to us. The new draft of the regulations.

If the draft regulations were to be adopted in their current or similar form, or other limits were imposed on the size of transactions that may be processed through Alipay, the ability of buyers to pay for purchases on our marketplaces using Alipay payment accounts could be materially limited.

Buyers on our marketplaces could continue to pay for purchases through other means, such as online bank transfers and credit cards, and continue to fund their Alipay escrow accounts. So long as payments are not made outside of the Alipay escrow system, we would continue to collect commissions on such purchases if they were made on marketplaces on which we collect commissions.

The PBOC has indicated that the purpose of these provisions and other parts of the draft regulations is prudential and that final regulations, including these provisions, would be subject to public consultation and revision. We rely on the convenience and ease of use that Alipay provides to our users. If we need to migrate to another third-party payment service for any reason, the transition would require significant time and management resources, and the third-party payment service may not be as effective, efficient or well-received by buyers and sellers on our marketplaces.

These third-party payment services also may not provide escrow services, and we may not be able to receive commissions based on GMV transacted through these systems. In addition, we would no longer have the benefit of the terms preferential to us under our commercial agreement with Alipay and would likely be required to pay more for payment processing and escrow services than we are currently paying. There can be no assurance that we would be able to reach agreement with an alternative online payments service on acceptable terms or at all.

In addition, any actual or perceived conflict of interest between us and Alipay or any other related company could also materially harm our reputation as well as our business and prospects. Table of Contents If we are not able to continue to innovate or if we fail to adapt to changes in our industry, our business, financial condition and results of operations would be materially and adversely affected. The Internet industry is characterized by rapidly changing technology, evolving industry standards, new service and product introductions and changing customer demands.

We continue to invest significant resources in our infrastructure, research and development and other areas in order to enhance our platform technology and our existing products and services as well as to introduce new high quality products and services that will attract more participants to our marketplaces. The changes and developments taking place in our industry may also require us to re-evaluate our business model and adopt significant changes to our long-term strategies and business plan.

Our failure to innovate and adapt to these changes would have a material adverse effect on our business, financial condition and results of operations.

Our business generates and processes a large amount of data, and the improper use or disclosure of such data could harm our reputation as well as have a material adverse effect on our business and prospects. Our marketplaces and platform generate and process a large quantity of transaction, demographic and behavioral data. We face risks inherent in handling large volumes of data and in protecting the security of such data. In particular, we face a number of challenges relating to data from transactions and other activities on our platform, including:.

Any systems failure or security breach or lapse that results in the release of user data could harm our reputation and brand and, consequently, our business, in addition to exposing us to potential legal liability. As we expand our operations, we may be subject to these laws in other jurisdictions where our sellers, buyers and other participants are located.

The laws, rules and regulations of other jurisdictions may impose more stringent or conflicting requirements and penalties than those in China, compliance with which could require significant resources and costs.

Our privacy policies and practices concerning the collection, use and disclosure of user data are posted on our websites. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any regulatory requirements or privacy protection-related laws, rules and regulations could result in proceedings or actions against us by governmental entities or others. These proceedings or actions may subject us to significant penalties and negative publicity, require us to change our business practices, increase our costs and severely disrupt our business.

We may not be able to maintain or grow our revenue or our business. We primarily derive our revenue from online marketing services, commissions based on transaction value derived from certain of our marketplaces and fees from the sale of memberships on our wholesale marketplaces, and we have experienced significant growth in our revenue. In particular, our revenue grew Our marketing customers are typically brand owners, distributors and merchants who are sellers on our marketplaces.

Marketing customers do not have long-term marketing commitments with us. The price a merchant is. Table of Contents willing to pay for online marketing services generally depends on its expected GMV, profit margins and lifetime value of customers derived from such marketing investment. If those services do not generate the rate of return expected by the seller or rates that are competitive to alternatives, the seller may reduce its spending on the marketing services we offer.

In addition, as we currently display fewer marketing impressions on our mobile applications as compared to our personal computer-based applications, our revenue growth rate may be affected by the rising usage of mobile devices.

Sellers on Tmall and Juhuasuan are required to pay a commission typically ranging from 0. For our wholesale marketplaces, we primarily derive revenues from membership fees.

Potential changes in our strategy for monetizing our wholesale marketplaces could result in prolonged reductions in revenue from those marketplaces. In addition, our revenue growth may slow or our revenues may decline for other reasons, including decreasing consumer spending, increasing competition, slowing growth of the China retail or China online retail industry, changes in government policies or general economic conditions.

In addition, our revenue growth rate will likely decline as our revenue grows to higher levels. Increased investments in our business may negatively affect our margins. We have experienced significant growth in our profit margins and net income. For example, our operating profit and net income grew Our operating profit and net income grew We cannot assure you that we will be able to maintain our growth at these levels, or at all.

Furthermore, we have made, and intend to continue to make, strategic investments and acquisitions to expand our user base, enhance our cloud computing business, add complementary products and technologies and further strengthen our ecosystem. For example, we expect to continue to make strategic investments and acquisitions relating to mobile, O2O services, digital media, category expansion as well as logistics services.

Our strategic investments and acquisitions may affect our future financial results, including by decreasing our margins and net income. Historically, our costs have increased each year due to these factors and we expect to continue to incur increasing costs, which may be greater than we anticipate.

Increases in our costs may materially and adversely affect our business and profitability and there can be no assurance that we will be able to sustain our net income growth rates or our margins. Failure to maintain or improve our technology infrastructure could harm our business and prospects. We are constantly upgrading our marketplaces and platform to provide increased scale, improved performance for both online and mobile use of our platform, additional built-in functionality and additional capacity for our cloud computing services.

To adapt to new products and upgrade our ecosystem infrastructure requires significant investment of time and resources, including adding new hardware, updating software and recruiting and training new engineering personnel.

Maintaining and improving our technology infrastructure requires significant levels of investment. For example, on Singles Day, there is significantly higher than normal activity on our marketplaces that our systems must handle.

In addition, much of the software and interfaces we use are internally developed and proprietary technology. If we experience problems with the functionality and. Table of Contents effectiveness of our software or platforms, or are unable to maintain and constantly improve our technology infrastructure to handle our business needs, our business, financial condition, results of operation and prospects, as well as our reputation, could be materially and adversely affected.

The successful operation of our business depends upon the performance and reliability of the Internet infrastructure in China. Our business depends on the performance and reliability of the Internet infrastructure in China. Almost all access to the Internet is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology of China.

In addition, the national networks in China are connected to the Internet through state-owned international gateways, which are the only channels through which a domestic user can connect to the Internet outside of China. In addition, the Internet infrastructure in China may not support the demands associated with continued growth in Internet usage.

The failure of telecommunications network operators to provide us with the requisite bandwidth could also interfere with the speed and availability of our websites. We have no control over the costs of the services provided by the national telecommunications operators. If the prices that we pay for telecommunications and Internet services rise significantly, our gross margins could be adversely affected.

In addition, if Internet access fees or other charges to Internet users increase, our user traffic may decrease, which in turn may significantly decrease our revenues. Our ecosystem could be disrupted by network interruptions. Our ecosystem depends on the efficient and uninterrupted operation of our computer and communications systems. Substantially all of our computer hardware and our cloud computing services is currently located in China.

In addition, a large number of sellers maintain their enterprise resource planning, or ERP, and customer relationship management, or CRM, systems on our cloud computing platform, which contains substantial quantities of data relating to their accounts, transaction data, buyer information and other data that enables sellers to operate and manage their businesses.

Although we have prepared for contingencies through redundancy measures and disaster recovery plans, such preparation may not be sufficient and we do not carry business interruption insurance. Any of these events could damage our reputation, significantly disrupt our operations and the operations of the sellers and other participants in our ecosystem and subject us to liability, which could materially and adversely affect our business, financial condition and results of operations. Our sellers use third-party logistics and delivery companies to fulfill and deliver their orders.

If these logistics and delivery companies fail to provide reliable delivery services, or our logistics information platform were to malfunction, suffer an outage or otherwise fail, our business and prospects, as well as our financial condition and results of operations, may be materially and adversely affected.

We cooperate with a number of third-party logistics and delivery companies to help our sellers fulfill orders and deliver their products to buyers. These interruptions may be due to events that are beyond our control or the control of these logistics and delivery companies, such as inclement weather, natural disasters, transportation disruptions or labor unrest. These logistics and delivery services could also be affected or.

Table of Contents interrupted by industry consolidation, insolvency or government shut-downs. We do not have agreements with logistics and delivery companies that require them to offer services to our sellers. The sellers on our marketplaces may not be able to find alternative logistics and delivery companies to provide logistics and delivery services in a timely and reliable manner, or at all. If the logistics information platform we use were to fail for any reason, our logistics providers would be severely hindered from or unable to connect with our sellers, and their services and the functionality of our ecosystem could be severely affected.

If the products sold on our marketplaces are not delivered in proper condition, on a timely basis or at shipping rates that marketplace participants are willing to bear, our business and prospects, as well as our financial condition and results of operations could be materially and adversely affected. If third-party service providers on our ecosystem fail to provide reliable or satisfactory services, our business, financial condition and results of operations may be materially and adversely affected.

In addition to the services provided to our ecosystem by Alipay and logistics providers, a number of third-party participants, including marketing affiliates, retail operational partners, independent software vendors, or ISVs, and various professional service providers, also provide services to sellers. We do not have any agreements that require these third-party participants to provide services to sellers. To the extent these third-party service providers are unable to provide satisfactory services to sellers on commercially acceptable terms or at all or if we fail to retain existing or attract new quality service providers to our marketplaces, our ability to retain or attract sellers and buyers may be severely limited, which may have a material and adverse effect on our business, financial condition and results of operations.

We depend on key management as well as experienced and capable personnel generally, and any failure to attract, motivate and retain our staff could severely hinder our ability to maintain and grow our business. Our future success is significantly dependent upon the continued service of our key executives and other key employees.

If we lose the services of any member of management or key personnel, we may not be able to locate suitable or qualified replacements, and may incur additional expenses to recruit and train new staff, which could severely disrupt our business and growth. In particular, Jack Ma, our lead founder, executive chairman and one of our principal shareholders, has been crucial to the development of our culture and strategic direction.

In addition, we have a number of employees, including many members of management, whose equity ownership in our company could give them a substantial amount of personal wealth following our initial public offering. As a result, it may be difficult for us to continue to retain and motivate these employees, and this wealth could affect their decisions about whether or not they continue to remain with us.

If we are unable to motivate or retain these employees, our business may be severely disrupted and our prospects could suffer.

The size and scope of our ecosystem also require us to hire and retain a wide range of effective and experienced personnel who can adapt to a dynamic, competitive and challenging business environment. We will need to continue to attract and retain experienced and capable personnel at all levels as we expand our business and operations. Competition for talent in the PRC Internet industry is intense, and the availability of suitable and qualified candidates in China is limited.

Competition for these individuals could cause us to offer higher compensation and other benefits to attract and retain them. Even if we were to offer higher compensation and other benefits, there is no assurance that these individuals will choose to join or continue to work for us. Any failure to attract or retain key management and personnel could severely disrupt our business and growth. Security breaches and attacks against our systems and network, and any potentially resulting breach or failure to otherwise protect confidential and proprietary information, could damage our reputation and negatively impact our business, as well as materially and adversely affect our financial condition and results of operations.

Although we have employed significant resources to develop our security measures against breaches, our cybersecurity measures may not detect or prevent all attempts to compromise our systems, including distributed.

Table of Contents denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in and transmitted by our systems or that we otherwise maintain.

Breaches of our cybersecurity measures could result in unauthorized access to our systems, misappropriation of information or data, deletion or modification of client information, or a denial-of-service or other interruption to our business operations. As techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service providers, we may be unable to anticipate, or implement adequate measures to protect against, these attacks.

We have in the past and are likely again in the future to be subject to these types of attacks, although to date no such attack has resulted in any material damages or remediation costs. If we are unable to avert these attacks and security breaches, we could be subject to significant legal and financial liability, our reputation would be harmed and we could sustain substantial revenue loss from lost sales and customer dissatisfaction. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks.

Cyber-attacks may target us, our sellers, buyers or other participants, or the communication infrastructure on which we depend. Actual or anticipated attacks and risks may cause us to incur significantly higher costs, including costs to deploy additional personnel and network protection technologies, train employees, and engage third-party experts and consultants.

Cybersecurity breaches would not only harm our reputation and business, but also could materially decrease our revenue and net income. Our failure to manage the growth of our business and operations could harm us. Our business has become increasingly complex, both in the types of businesses we operate and their scale. We have significantly expanded our headcount, office facilities and infrastructure, and anticipate that further expansion in certain areas and geographies will be required.

This expansion increases the complexity of our operations and places a significant strain on our management, operational and financial resources. We must continue to effectively hire, train and manage new employees. If our new hires perform poorly or if we are unsuccessful in hiring, training, managing and integrating new employees, our business, financial condition and results of operations may be materially harmed. Moreover, our current and planned personnel, systems, procedures and controls may not be adequate to support our future operations.

To effectively manage the expected growth of our operations and personnel, we will need to continue to improve our transaction processing, operational and financial systems, procedures and controls, which could be particularly challenging as we acquire new operations with different and incompatible systems. These efforts will require significant managerial, financial and human resources.

We cannot assure you that we will be able to effectively manage our growth or to implement all these systems, procedures and control measures successfully. If we are not able to manage our growth effectively, our business and prospects may be materially and adversely affected.

We face risks relating to our acquisitions, investments and alliances. We have recently acquired and invested in a significant number of businesses, technologies, services and products in recent years and have a number of pending investments and acquisitions that are subject to closing conditions.

At any given time we may be engaged in discussions or negotiations with respect to one or more of these types of transactions. These transactions involve significant challenges and risks, including:. Our significant acquisition activity has occurred recently, and we do not have substantial experience in integrating major acquisitions. Any of these difficulties could disrupt our ongoing business, distract our management and employees and increase our expenses, such as impairment charges and write-offs.

We may be subject to allegations and lawsuits claiming that items listed on our marketplaces are pirated, counterfeit or illegal. We have received in the past, and we anticipate we will receive in the future, communications alleging that items offered or sold through our online marketplaces by third parties or that we make available through other services, such as our online music platform, infringe third-party copyrights, trademarks and patents or other intellectual property rights.

Although we have adopted measures to verify the authenticity of products sold on our marketplaces and minimize potential infringement of third-party intellectual property rights through our intellectual property infringement complaint and take-down procedures, these measures may not always be successful.

We may be subject to allegations of civil or criminal liability for unlawful activities carried out by third parties through our online marketplaces. When we receive complaints or allegations regarding infringement or counterfeit goods, we follow certain procedures to verify the nature of the complaint and the relevant facts.

We believe these procedures are important to ensure confidence in our marketplace among buyers and sellers; however, these procedures could result in delays in delistings of allegedly infringing product listings. In the event that alleged counterfeit or infringing products are listed or sold on our marketplaces or our other services, we could face claims for such listings, sales or alleged infringement or for our failure to act in a timely or effective manner to restrict or limit such sales or infringement.

In addition, these changes may reduce the attractiveness of our marketplaces and other services to buyers, sellers or other users. A customer whose content is removed or services are suspended or terminated by us, regardless of our compliance with the applicable laws, rules and regulations, may dispute our actions and commence action against us for damages based on breach of contract or other causes of action or make public complaints or allegations.

Any costs incurred as a result of liability or asserted liability relating to the sale of unlawful goods or other infringement could harm our business. Moreover, we have in the past received negative publicity regarding the sales of counterfeit and pirated items on our marketplaces. In , and , Alibaba. Trade Representative. The U. Trade Representative subsequently. Table of Contents removed these marketplaces from the list. Continued public perception that counterfeit or pirated items are commonplace on our marketplaces or perceived delays in our removal of these items, even if factually incorrect, could damage our reputation, result in lower list prices for goods sold through our marketplaces, harm our business, result in regulatory pressure or action against us and diminish the value of our brand name.

Failure to deal effectively with any fraud perpetrated and fictitious transactions conducted on our marketplaces and other sources of customer dissatisfaction would harm our business.

We face risks with respect to fraudulent activities on our marketplaces and periodically receive complaints from buyers who may not have received the goods that they had purchased, as well as complaints from sellers who have not received payment for the goods that a buyer had contracted to purchase.

Although we have implemented various measures to detect and reduce the occurrence of fraudulent activities on our marketplaces, there can be no assurance that such measures will be effective in combating fraudulent transactions or improving overall satisfaction among our sellers, buyers and other participants.

Additional measures that we take to address fraud could also negatively affect the attractiveness of our marketplaces to buyers or sellers. In addition, sellers on our marketplaces contribute to a fund to provide consumer protection guarantees.

If our sellers do not perform their obligations under these programs, then we may use funds that have been deposited by sellers in a consumer protection fund to compensate buyers. If the amounts in the fund are not sufficient, we may choose to compensate buyers for such losses although we are not legally obligated to do so.

Although we have recourse against our sellers for any amounts we incur, there is no assurance that we would be able to collect from our sellers.

This activity may harm other sellers by enabling the perpetrating seller to be favored over legitimate sellers, and may harm buyers by deceiving them into believing that a seller is more reliable or trusted than the seller actually is.

Moreover, illegal, fraudulent or collusive activities by our employees could also subject us to liability or negative publicity. For instance, we learned that in early and in two separate incidents, certain of our employees had accepted payments from sellers in order to receive preferential treatment on Alibaba.

Although we dismissed the employees responsible for the incidents and have taken action to further strengthen our internal controls and policies with regard to the review and approval of seller accounts, sales activities and other relevant matters, we cannot assure you that such controls and policies will prevent fraud or illegal activity by our employees or that similar such incidents will not occur in the future.

Any such illegal, fraudulent or collusive activity could severely damage our brand and reputation as an operator of trusted marketplaces, which could drive users and buyers away from our marketplaces, and materially and adversely affect GMV transacted on our marketplaces, our revenues and our net income. Negative publicity and user sentiment generated as a result of actual or alleged fraudulent or deceptive conduct on our platform or by our employees could severely diminish consumer confidence in and use of our services, reduce our ability to attract new or retain current sellers, buyers and other participants, damage our reputation and diminish the value of our brand names, and materially and adversely affect our business, financial condition and results of operations.

We may increasingly become a target for public scrutiny, including complaints to regulatory agencies, negative media coverage, including social media and malicious reports, all of which could severely damage our reputation and materially and adversely affect our business and prospects. We process millions of transactions on a daily basis on our marketplaces, and the high volume of transactions taking place on our marketplaces creates the possibility of heightened attention from the public, the media and our participants.

For example, we receive complaints from our sellers, buyers and other participants. Table of Contents about our marketplaces. In addition, changes in our services or policies have resulted and could result in objections by members of the public, the media, including social media, participants in our ecosystem or others.

From time to time, these objections or allegations, regardless of their veracity, may result in public protests or negative publicity, which could result in government inquiry or harm our reputation. Corporate transactions we or related parties undertake may also subject us to increased media exposure and public scrutiny.

There is no assurance that we would not become a target for public scrutiny in the future or such scrutiny and public exposure would not severely damage our reputation as well as our business and prospects. In addition, our directors and management have been, and continue to be, subject to scrutiny by the media and the public regarding their activities at and outside Alibaba Group, which may result in unverified, inaccurate or misleading information about them being reported by the press.

Negative publicity about our executive chairman or other founders, directors or management, even if untrue or inaccurate, may harm our reputation. We and Alipay are subject to regulation, and future regulations may impose additional requirements and other obligations on our business or otherwise that could materially and adversely affect our business, financial condition and results of operations.

The industries in which we and Alipay operate in the PRC, including online and mobile commerce and payments, financial services and cloud computing, are highly regulated. The PRC government authorities are likely to continue to issue new laws, rules and regulations governing these industries and require new and additional licenses, permits and approvals from us and our users.

In addition, there is no assurance that any required licenses, permits and approvals could be obtained in a timely or cost-effective manner, and failure to obtain them could have a material adverse effect on our business, financial condition and results of operations.

Changes in regulatory enforcement as well as tax policy in the PRC could also result in additional compliance obligations and increased costs or place restrictions upon our current or future operations. Any such legislation or regulation could also severely disrupt and constrain our business and the payment services used on our marketplaces.

In addition, we will also face the challenge of complying concurrently with the compliance rules and regulations of multiple jurisdictions, and such rules or regulations could conflict or interact with each other in complex ways. We have from time to time been subject to PRC and other foreign government inquiries and investigations, including those relating to website content and alleged third-party intellectual property infringement.

We also face scrutiny, and have been subject to inquiries and investigations, from foreign governmental bodies that focus on cross-border trade, intellectual property protection, human rights and user privacy matters. None of these inquiries and investigations has resulted in significant restrictions on our business operations. However, as we continue to grow in scale and significance, we expect to face increased scrutiny, which will, at a minimum, result in our having to increase our investment in compliance and related capabilities and systems.

The increasing sophistication and development of our user base will also increase the need for higher standards of user protection, privacy protection and dispute management. Any increased involvement in inquiries or investigations could result in significantly higher legal and other costs, diversion of management and other resources, as well as negative publicity, which could harm our business and reputation and materially reduce our revenue and net income.

Alipay, which provides the substantial majority of the payment processing services on our marketplaces, is subject to various laws, rules and regulations in the PRC and other countries where it operates, including those governing banking, privacy, cross-border and domestic money transmission, anti-money laundering, counter-.

Table of Contents terrorist financing and consumer protection laws, rules and regulations. These laws, rules and regulations are highly complex and could change or be reinterpreted to make it difficult or impossible for Alipay to comply. In recent years, the PRC government has increasingly focused on regulation of the financial industry, including laws, rules and regulations relating to the provision of payment services.

Currently, in certain jurisdictions where Alipay does not have the required money transmitter or other licenses, Alipay provides payment processing and escrow services through third-party service providers. If these providers were to terminate their relationship with Alipay or otherwise cease providing services to Alipay, cross-border transactions on our marketplaces would be negatively affected. We may be accused of infringing intellectual property rights of third parties and content restrictions of relevant laws.

Third parties may claim that the technology used in the operation of our platforms or our service offerings, including our cloud computing services, infringes upon their intellectual property rights.

Although we have not in the past faced material litigation involving direct claims of infringement by us, the possibility of intellectual property claims against us increases as we continue to grow, particularly internationally. Such claims, whether or not having merit, may result in our expenditure of significant financial and management resources, injunctions against us or payment of damages.

We may need to obtain licenses from third parties who allege that we have infringed their rights, but such licenses may not be available on terms acceptable to us or at all. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims. China has enacted laws and regulations governing Internet access and the distribution of products, services, news, information, audio-video programs and other content through the Internet.

The PRC government has prohibited the distribution of information through the Internet that it deems to be in violation of PRC laws and regulations. If any of the information disseminated through our marketplaces and websites were deemed by the PRC government to violate any content restrictions, we would not be able to continue to display such content and could become subject to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially and adversely affect our business, financial condition and results of operations.

The outcome of any claims, investigations and proceedings is inherently uncertain, and in any event defending against these claims could be both costly and time-consuming, and could significantly divert the efforts and resources of our management and other personnel. An adverse determination in any such litigation or proceedings could cause us to pay damages, as well as legal and other costs, limit our ability to conduct business or require us to change the manner in which we operate.

We may become the target of anti-monopoly and unfair competition claims, which may result in our being subject to fines as well as constraints on our business. Table of Contents The PRC Anti-Monopoly Law also provides a private right of action for competitors or users to bring anti-monopoly claims against companies. In recent years, an increased number of companies have been exercising their right to seek relief under the PRC Anti-Monopoly Law.

As public awareness of the rights under the PRC Anti-Monopoly Law increases, more companies, including our competitors, business partners and customers may resort to the remedies under the law to improve their competition position, regardless of the merits of their claims. We may receive close scrutiny from government agencies under the PRC Anti-Monopoly Law in connection with our business practices, investments and acquisitions.

Any anti-monopoly lawsuit or administrative proceeding initiated against us may result in our being subject to profit disgorgement, heavy fines and various constraints on our business, or result in negative publicity which could harm our reputation and negatively affect the trading price of our ADSs.

These constraints could include forced termination of any agreements or arrangements that are determined to be in violation of anti-monopoly laws, required divestitures and limitations on certain business practices, which may limit our ability to continue to innovate, diminish the appeal of our services and increase our operating costs.

These constraints could also enable our competitors to develop websites, products and services that mimic the functionality of our services, which could decrease the popularity of our marketplaces among sellers, buyers and other participants, and cause our revenue and net income to decrease materially. We may face challenges in expanding our cross-border operations. As we plan to continue expanding our existing cross-border operations into existing and other markets, we will face risks associated with expanding into markets in which we have limited or no experience and in which our company may be less well-known.

We may be unable to attract a sufficient number of customers and other participants, fail to anticipate competitive conditions or face difficulties in operating effectively in these new markets. The expansion of our cross-border business will also expose us to risks relating to staffing and managing cross-border operations, increased costs to protect intellectual property, tariffs and other trade barriers, differing and potentially adverse tax consequences, increased and conflicting regulatory compliance requirements, lack of acceptance of our service offerings, challenges caused by distance, language and cultural differences, exchange rate risk and political instability.

Accordingly, any efforts we make to expand our cross-border operations may not be successful, which could limit our ability to grow our revenue, net income and profitability. Our brand name and our business may be harmed by aggressive marketing and communications strategies of our competitors. Our revenue and net income may be materially and adversely affected by any economic slowdown in China as well as globally.

The success of our business ultimately depends on consumer spending. We derive substantially all of our revenue from China. As a result, our revenue and net income are impacted to a significant extent by economic conditions in China and globally, as well as economic conditions specific to online and mobile commerce. The global economy, markets and levels of consumer spending are influenced by many factors beyond our control, including consumer perception of current and future economic conditions, political uncertainty, levels of employment, inflation or deflation, real disposable income, interest rates, taxation and currency exchange rates.

Table of Contents The PRC government has in recent years implemented a number of measures to control the rate of economic growth, including by raising interest rates and adjusting deposit reserve ratios for commercial banks as well as by implementing other measures designed to tighten credit and liquidity. These measures have contributed to a slowdown of the PRC economy. Any continuing or worsening slowdown could significantly reduce domestic commerce in China, including through the Internet generally and within our ecosystem.

An economic downturn, whether actual or perceived, a further decrease in economic growth rates or an otherwise uncertain economic outlook in China or any other market in which we may operate could have a material adverse effect on our business, financial condition and results of operations. Our results of operations fluctuate significantly from quarter to quarter which may make it difficult to predict our future performance. Our results of operations fluctuate significantly from quarter to quarter.

In addition, our business is characterized by seasonal fluctuations, which may cause further fluctuations. The fourth quarter of each calendar year generally contributes the largest portion of our annual revenues due to a number of factors, such as sellers allocating a significant portion of their online marketing budgets to the fourth calendar quarter, promotions, such as Singles Day on November 11 of each year, the holiday season in China and the impact of seasonal buying patterns in respect of certain categories such as apparel.

The first quarter of each calendar year generally contributes the smallest portion of our annual revenues, primarily due to the Chinese New Year holiday, during which time consumers generally spend less and businesses in China are generally closed. We may also introduce new promotions or change the timing of our promotions in ways that further cause our quarterly results to fluctuate and differ from historical patterns.

In addition, seasonal weather patterns may affect the timing of buying decisions. For example, unexpectedly long periods of warm weather could delay the purchase of heavier clothing items that have higher average selling prices, resulting in lower than expected GMV. The performance of our equity investees and of businesses, including internally developed businesses, in which we have made investments may also result in fluctuations in our results of operations.

Our results of operations will likely fluctuate due to these and other factors, some of which are beyond our control. In addition, our rapid growth has masked the seasonality that might otherwise be apparent in our results of operations. If our growth slows, we expect that the seasonality in our business may become more pronounced.

Our quarterly and annual financial results will likely differ from our historical performance. To the extent our results of operations are below the expectations of public market analysts and investors in the future, or if there are significant fluctuations in our financial results, the market price of our ADSs could decline materially. We may not be able to protect our intellectual property rights.

We rely on a combination of trademark, fair trade practice, patent, copyright and trade secret protection laws in China and other jurisdictions, as well as confidentiality procedures and contractual provisions, to protect our intellectual property rights. We also enter into confidentiality agreements with our employees and any third parties who may access our proprietary information, and we rigorously control access to our proprietary technology and information. Intellectual property protection may not be sufficient in China or other countries in which we operate.

Confidentiality agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China or elsewhere. In addition, policing any unauthorized use of our intellectual property is difficult, time-consuming and costly and the steps we have taken may be inadequate to prevent the misappropriation of our intellectual property.

In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.

We operate a micro-finance business that provides micro loans to small- and medium-sized enterprises who are sellers on our wholesale and retail marketplaces, or our SME loan business. We extend micro loans through our lending vehicles licensed by the relevant local governments in China. Micro-finance is a highly regulated business in China subject to the supervision of and regulation by the PBOC and the relevant local government authorities, and our failure to comply with any current or future laws, rules and regulations could subject us to liability, enforcement action by regulators and could harm our reputation.

However, our credit assessment model may not accurately predict the creditworthiness of our borrowers, and our actual losses could materially exceed our allowances for doubtful accounts. If losses on our portfolio of loans are greater than we expect, whether due to inaccuracies with our credit assessment model or changes in economic conditions or otherwise, our net income could be materially and adversely reduced.

In addition, we rely on third-party financial institutions in connection with our micro loan activities. In particular, in order to comply with applicable lending limits, we have entered into arrangements under which we transfer the legal title or economic benefits in micro loan receivables in exchange for cash proceeds to finance such receivables.

Under these arrangements, we are required to absorb a portion of the losses incurred in the outstanding portfolio of loan receivables. If loan receivable financing from third-party financial institutions is not available on acceptable terms or at all, our ability to continue to engage in the micro loan business could be severely constrained. In addition, because we continue to be exposed to risk of loss with respect to a portion of losses on the loan portfolio, any failure of borrowers to repay their underlying loans could adversely affect our business, financial condition and results of operations.

We may be subject to claims under consumer protection laws, including health and safety claims and product liability claims, if property or people are harmed by the products sold on our marketplaces. Due to several high-profile incidents involving food safety and consumer complaints that have occurred in China in recent years, the PRC government, media outlets and public advocacy groups are increasingly focused on consumer protection. Moreover, as part of our growth strategy, we expect to increase our focus on food and beverage and healthcare products, which could expose us to increasing liability associated with consumer protection laws in those areas.

Operators of commerce marketplaces and platforms are subject to certain provisions of consumer protection laws even where such operator is not the seller of the product or service purchased by the consumer. For example, under applicable consumer protection laws in China, e-commerce platform operators may be held liable for consumer claims relating to damage if they are unable to provide consumers with the true name, address and contact details of sellers or service providers.

In addition, if we do not take appropriate remedial action against sellers or service providers for actions they engage in that we know, or should have known, would infringe upon the rights and interests of consumers, we may be held jointly liable with the seller or service provider for such infringement. Moreover, applicable consumer protection laws in China hold that trading platforms will be held liable for failing to meet any undertakings such platforms make to consumers with regard to products listed on their websites.

If claims are brought against us under any of these laws, we could be subject to damages and reputational damage as well as action by regulators, which could have a material adverse effect on our business, financial condition and results of operations.

We do not maintain product liability insurance for products and services transacted on our marketplaces, and our rights of indemnity from the sellers on our marketplaces may not adequately cover us for any liability we may incur.

Even unsuccessful claims could result in the expenditure of funds and management time and resources and could materially reduce our net income and profitability. Table of Contents Tightening of tax compliance efforts with respect to the revenue or profit generated by our sellers could materially and adversely affect our business, financial condition and results of operations.

E-commerce in China is still developing, and the PRC government may require operators of marketplaces, such as our company, to assist in the collection of taxes with respect to the revenue or profit generated by sellers from transactions conducted on their platforms. A significant number of small businesses and sole proprietors operating businesses through storefronts on Taobao Marketplace may not have completed the required tax registration.

PRC tax authorities may enforce registration requirements that target small businesses or sole proprietors on Taobao Marketplace and may request our assistance in these efforts.

As a result, these sellers may be subject to more stringent tax compliance requirements and liabilities and their business on our marketplaces could suffer or they could decide to remove their storefronts from our marketplace rather than comply, which could in turn negatively affect us. We may also be requested by tax authorities to supply information on our sellers, such as transaction records and bank account information, and assist in the enforcement of tax regulations, including the payment and withholding obligations against our sellers, in which case, potential sellers might not be willing to open storefronts on our marketplaces.

Heightened enforcement against participants in e-commerce transactions including imposition of withholding obligations on us with respect to business or value-added tax could have a material adverse effect on our business, financial condition and results of operations. We may be subject to material litigation.

We have been involved in litigation relating principally to third-party intellectual property infringement claims, contract disputes, employment related cases and other matters in the ordinary course of our business. As our ecosystem expands, and as litigation becomes more common in China, we may face an increasing number of such claims, including those involving higher amounts of damages, and after we become a publicly-listed company with a higher profile, we may face additional exposure to claims and lawsuits.

An adverse determination in any such litigation or proceedings could cause us to pay damages as well as legal and other costs, limit our ability to conduct business or require us to change the manner in which we operate. We may be subject to liability for content on our websites and mobile interfaces that is alleged to be socially destabilizing, obscene, defamatory, libelous or otherwise unlawful.

Under PRC law, we are required to monitor our websites and the websites hosted on our servers and mobile interfaces for items or content deemed to be socially destabilizing, obscene, superstitious or defamatory, as well as items, content or services that are illegal to sell online or otherwise in other jurisdictions in which we operate our marketplaces, and promptly take appropriate action with respect to such items, content or services.

We may also be subject to potential liability for any unlawful actions of our customers or users of our websites or mobile interfaces or for content we distribute that is deemed inappropriate. It may be difficult to determine the type of content that may result in liability to us, and if we are found to be liable, we may be subject to fines, have our relevant business operation licenses revoked, or be prevented from operating our websites or mobile interfaces in China.

In addition, claims may be brought against us for defamation, libel, negligence, copyright, patent or trademark infringement, tort including personal injury , other unlawful activity or other theories and claims based on the nature and content of information posted on our marketplaces, including product reviews and message boards, by our buyers, sellers and other marketplace participants.

Regardless of the outcome of such a dispute or lawsuit, we may suffer from negative publicity and reputational damage as a result of these actions. Table of Contents Failure to comply with the terms of our indebtedness could result in acceleration of indebtedness, which could have an adverse effect on our cash flow and liquidity. If we breach any of these covenants, including by failing to maintain certain financial ratios, our lenders will be entitled to accelerate our debt obligations.

Any default under our credit facility could require that we repay these loans prior to maturity as well as limit our ability to obtain additional financing, which in turn may have a material adverse effect on our cash flow and liquidity. We may need additional capital but may not be able to obtain it on favorable terms or at all.

We may require additional cash resources due to future growth and development of our business, including any investments or acquisitions we may decide to pursue. If our cash resources are insufficient to satisfy our cash requirements, we may seek to issue additional equity or debt securities or obtain new or expanded credit facilities.

Our ability to obtain external financing in the future is subject to a variety of uncertainties, including our future financial condition, results of operations, cash flows, share price performance, liquidity of international capital and lending markets and PRC governmental regulations over foreign investment and the Internet industry in the PRC. In addition, incurring indebtedness would subject us to increased debt service obligations and could result in operating and financing covenants that would restrict our operations.

There can be no assurance that financing will be available in a timely manner or in amounts or on terms acceptable to us, or at all. Any failure to raise needed funds on terms favorable to us, or at all, could severely restrict our liquidity as well as have a material adverse effect on our business, financial condition and results of operations. Moreover, any issuance of equity or equity-linked securities could result in significant dilution to our existing shareholders.

We are subject to interest rate risk in connection with our indebtedness. We are exposed to interest rate risk related to our indebtedness. As a result, the interest expenses under our bank borrowings will be subject to the potential impact of any fluctuation in LIBOR.

Although from time to time, we use hedging transactions in an effort to reduce our exposure to interest rate risk, these hedges may not be effective. We may not have sufficient insurance coverage. We have obtained insurance to cover certain potential risks and liabilities, such as property damage. However, insurance companies in China offer limited business insurance products.

As a result, we may not be able to acquire any insurance for certain types of risks such as business liability or service disruption insurance for our operations in China, and our coverage may not be adequate to compensate for all losses that may occur, particularly with respect to loss of business or operations.

We do not maintain business interruption insurance or product liability insurance, nor do we maintain key-man life insurance. This could leave us exposed to potential claims and losses. Any business disruption, litigation, regulatory action, outbreak of epidemic disease or natural disaster could also expose us to substantial costs and diversion of resources.

We cannot assure you that our insurance coverage is sufficient to prevent us from any loss or that we will be able to successfully claim our losses under our current insurance policy on a timely basis, or at all.

If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition and results of operations could be materially and adversely affected. Table of Contents An occurrence of a natural disaster, widespread health epidemic or other outbreaks could have a material adverse effect on our business, financial condition and results of operations.

Our business could be materially and adversely affected by natural disasters, such as snowstorms, earthquakes, fires or floods, the outbreak of a widespread health epidemic, such as swine flu, avian influenza, severe acute respiratory syndrome, or SARS, or other events, such as wars, acts of terrorism, environmental accidents, power shortage or communication interruptions.

The occurrence of such a disaster or a prolonged outbreak of an epidemic illness or other adverse public health developments in China or elsewhere in the world could materially disrupt our business and operations. Such events could also significantly impact our industry and cause a temporary closure of the facilities we use for our operations, which would severely disrupt our operations and have a material adverse effect on our business, financial condition and results of operations.

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Our operations could be disrupted if any of our employees or employees of our business partners were suspected of having the swine flu, avian influenza or SARS, since this could require us or our business partners to quarantine some or all of such employees or disinfect the facilities used for our operations. In addition, our revenue and profitability could be materially reduced to the extent that a natural disaster, health epidemic or other outbreak harms the global or PRC economy in general.

Our operations could also be severely disrupted if our buyers, sellers or other participants were affected by such natural disasters, health epidemics or other outbreaks. Risks Related to Our Corporate Structure. The Alibaba Partnership and related voting agreements will limit your ability to nominate and elect directors.

Our articles of association, as we expect them to be amended and become effective upon completion of this offering, will have the effect of allowing the Alibaba Partnership to nominate a simple majority of our board of directors. In addition, we expect to enter into a voting agreement that will take effect upon the completion of this offering, pursuant to which both SoftBank and Yahoo will agree to vote their shares in favor of the Alibaba Partnership director nominees at each annual general shareholders meeting.