We look at Baidu’s VIE corporate structure and attempt to quantify the takeover, bankruptcy and dividend risks to holder’s of BIDU on the NASDAQ. In this paper we attempt to quantify a reasonable discount to BIDU-NASDAQ given that, similar to other Chinese internet companies, it is essentially a shell company with much of its revenues being indirect. For some background, PRC laws and regulations restrict foreign investment in the internet, value-added telecommunication-based online advertising, online audio and video services and mobile application distribution businesses. In order to bypass these restrictions, Chinese companies in these industries, including Baidu and Alibaba, have adopted a mechanism called […]
Variable Interest Entity
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