China is the real winner from Alibaba IPO

Discussion in 'Stock Market Forum' started by CandraLovell, Sep 23, 2014.

  1. CandraLovell

    CandraLovell Member

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    http://www.ibtimes.com/alibaba-ipo-winners-softbank-jack-ma-bankers-1692863

    question for wise investors - YHOO is sitting on:
    $18 B cash/short-term investments thanks to BABA sale mostly.
    $31 B or so in BABA stock.
    $8 B in Yahoo!Japan stock.
    That's $57B in stock and cash.
    YHOO currently has a market cap of $40.7B - over $16 B LOWER than their cash and stock holdings.
    Why wouldn't someone buy YHOO at this price?


    І rеmеmbеr whеn nеws саmе оut thаt Yаhоо dесіdеd tо оutsоurсе thеіr sеаrсh еngіnе tо Місrоsоft. Ѕоmе thоught іt wаs gооd іdеа, but mоst реорlе thоught thаt Yаhоо јust gаvе аwау thеіr mоst vаluаblе аssеt. Аssеt, fоr whісh Ваllmеr wаs wіllіng tо рау 45 bіllіоns оr sо. Νоw wе sее whо wаs rіght.
     
  2. Brad321

    Brad321 Active Member

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    China is the big winner and the world's investors are the big losers.

    BABA should have been shunned by investors to get China's attention. There are three things we need to see from China before sending our dollars to them:

    1) Clarity that the VIE structure is legitimate and will be enforced. The VIE structure could easily be declared an illegal attempt to circumvent Chinese laws against foreign ownership (because it is). They are looking the other way while cash flows into the PRC, but that could change on a whim and wipe out foreign shareholders.

    2) China needs to join the rest of the world and agree to turn over auditor working papers to the PCAOB for auditor review and to regulators in enforcement actions. They need to stop protecting their frauds and increase transparency.

    3) China needs to enforce judgments from international courts. Too many Chinese frauds are allowed to get away with it. Lawsuit after lawsuit gets dismissed because all assets are in China and are unavailable to collect even if the Plaintiff prevailed.

    As investors, we should not tolerate this lack of accountability. Our regulators have let us down and it is up to us to refuse to trade in stocks that have limited transparency and are unaccountable for their actions. That is the only way to get their attention.
     
  3. JR Ewing

    JR Ewing Super Moderator Staff Member

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    Alibaba is apparently interested in taking over Yahoo, believe it or not.
     
  4. Profit5500

    Profit5500 Senior Investor

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    That means a change in the email accounts lol. I would have to get used to seeing Alibaba over on Yahoo soon. I would think this is the right time for them to make an investment.
     
  5. Allison2021

    Allison2021 Well-Known Member

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    Brad wrote, "3) China needs to enforce judgments from international courts. Too many Chinese frauds are allowed to get away with it. Lawsuit after lawsuit gets dismissed because all assets are in China and are unavailable to collect even if the Plaintiff prevailed"
    That has been my number one fear about Alibaba. Since, the courts cannot impose permanent sanctions against those Chinese firms or individuals who violate copyright laws
    I do not believe Alibaba is capable of competing with Amazon. Amazon has to abide by international laws. Therefore, they are viewed as trustworthy. More consumers believe Amazon is more likely to market QUALITY and SAFE merchandise. Consumers are less confident that Alibaba may sell defective or poorer quality products. For example, Amazon has to follow US regulations in selling packaged milk products, or children's toys. In the past few years, Chinese manufacturers have been found to sell defective or unsafe products. Those are reasons to cause caution when investing in the future of Alibaba.
     
  6. Profit5500

    Profit5500 Senior Investor

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    Well in that case I would have to feel safer with Amazon in the long run. Amazon FTW I would prefer them then to go over to Alibaba. This is why I wouldn't try trusting China since they would care less about regulations with their products while its being shipped any kind of way.
     
  7. Raven82

    Raven82 Active Member

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    New to the Site and this is my first post. I trust BABA and think it is a good company. Been investing since 1979 and bought stocks like MMM NVS STO ABB and JNJ when they were a fraction of what they are now and still have almost all of them. BABA is a risk like any stock and I bought a solid block but it is still only 3 percent of my portfolio so I'm not worried. I also like the Japanese stocks NJ and NTT but I stick mainly to North American and European stock that are Non EU (Swiss and Norwegian companies)
     
  8. Brad321

    Brad321 Active Member

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    Those are two very different things. Alibaba may be a good company, but the stock (BABA) is not a very good stock. It most certainly does not have the same risks as other stocks trading in the US markets. Alibaba could succeed as a company, but you can still get wiped-out on your BABA stock on a whim from a Chinese Communist Party leader. Of course nobody can tell you this WILL happen, but it CAN happen. Investing is about minimizing risk to gain an acceptable reward.

    I am not bashing the stock in any manner. I wish the best of luck to anybody who understands the risks they are taking and chooses to make a speculative gamble here. The problem comes from those who are led to believe "BABA is a risk like any stock" when this is not the case. It has a much greater risk due to many factors including the corporate governance by-laws where shareholders can never pick the Board of Directors, the fact it is a VIE and you don't OWN any assets... you merely CONTROL them. There are also the geopolitical risks in China and the fact you will never have very good transparency on their operations. The risks are great. If they meet your risk-tolerance guidelines... great. Just make the trade as an informed investor and don't fall for the hype from the banksters that make billions bringing them to market.
     
  9. Raven82

    Raven82 Active Member

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    I totally understand what you are saying on this Brad but here is how I went about deciding on BABA. I made a lot of money for 3 decades playing it fairly safe. Patiently working for 1st downs and not going for the TD Bomb on stocks. I selected stocks like NVS JNJ ABB SBUX STO and BA when they were low or on dips and did well. BABA was bought as a risk I could afford. What sealed the deal is that I have dozens of market savy Chinese friends that would never touch a Chinese stock but jumped all over BABA. Like anyone I did my homework and also know that the common view we have on China is about 10 years outdated, they are very much into global business and in many ways more Capitalistic than the politically correct/class envy war West.
     
  10. troutski

    troutski Guest

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    Ugh, Alibaba would be smart to flourish on its own and stay far, far away from Yahoo. The IPO made plenty of new millionaires in China, that's for sure. The stock has plenty of room for upward movement, but I'm not getting in on the action. I know very little about the company, other than the it being an e-commerce giant in China.
     

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