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Published: Monday 18 January, 2016

Alibaba Group Holding Limited NYSE I would almost want to be contrarian here and suggest Alibaba would be more valuable private. If their numbers are real, they don't need an IPO to grow. The IPO would be worth about 9 months of last year's net, perhaps 4 months of next year's net. 4 months of net income for a lifetime of blessings. Makes Esau look good. At least he got a free lunch. Jack Ma has made Alibaba, but he wants to move on. He has said so. This leaves a lot a rubes holding Alibaba IPO stock. What are Alibaba's assets other than Jack Ma? Few, very few, overseas, my friend. Wall Street is pulling a fast one. After 2008 2009, it is amazing how many people want to lose their money so they can once again Nike Basketball Shoes blame Wall Street. The IPO PR machine pegs Alibaba at 70+ percent YoY increase in sales, but at $240+ billion per year, how could any company on Earth grow at over 70%. Is that crazy talk? That seems impossible when Alibaba "claims" to be bigger than its next 2 or 3 competitors combined. Reality check? Alibaba claims over 8 million sellers. All of the US has about 8,200 "public" corporations actively in business. Wall Street PR? What I surmise is that the vast majority of over eager stock buyers have NO IDEA what Alibaba does or owns. Wall Street is chumming the waters. Soon, a fish fry! Rip, I might be wrong but I have discovered that Alibaba has 0 means of production, 0 means for distribution, 0 merchandise for sale. Alibaba's story is not possible, it appears made up fiction, and Wall Street appears to be over hyping the Alibaba IPO. What is Alibaba, really?

Alibaba is similar to eBay but definitely not "B Walmart spread around rural America or "ecommerce" Amazon with global warehouses called fulfillment centers. How is Alibaba making money, really? Alibaba does no direct sales. Alibaba offers free Web services to 3rd parties and optional "for a fee" Web placement and advertising. I believe Alibaba is closer to a $5 billion per year business. I believe that much of the merchandise is gray or black market, including factory rejects and counterfeits. I might be wrong but I have studied merchandise I understand like Nike shoes and electronics. Alibaba offers Apple iPads at $120 (heh heh). Alibaba offers Rolex watches far below $35 (wow, one seller offers $0.10 per Rolex). I see Alibaba as around a $5 billion per year business fronting/arbitraging for questionable merchants and offshore money flows. What do SA readers see? A couple points from the filing. For 2013, 12% of Alibaba's total revenues are "international" with 91% being wholesale versus retail, a contrast to Alibaba's Chinese segment which represents 85% of total revenues of which 93% are retail Nike Zoom Kobe IX(9) versus wholesale. I would wager that of the international 12% revenue segment somewhere around 90% are based within Asia still. Many will claim that this spells doom for Amazon and eBay, but I'm not so sure this can be assumed. Alibaba has relentlessly been spending cash to buyout businesses and take stakes in companies. They will continue to do so at a higher pace after they raise the IPO proceeds. This is a nice transition to the second point, the company has grown total debt from $210 million in 2012 to $6.5 billion in 2013. This reflects over 100% equity on a pro forma basis.

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