Against my better sensibilities, I finally took a peek at the Alibaba registration statement for its IPO. I can’t believe this thing was floated in the U.S. market. It’s now the poster child example of how corrupt and controlled by the bankers our entire system is. Any professional money managers/fund managers who bought this stock for anything more than a quick flip should be strung up from an oak tree by the neck for breach of fiduciary duty.
The IPO raised $21.8 billion dollars and paid the bankers involved $300 million. This capital raise is essentially a blind pool which can used for anything. The prospectus says, “proceeds to be used for general corporate purposes.” Hmmm…just how well do the new owners of this stock know the founder and Executive Chairman? The “Risks” section was an astonishing 43 1/2 pages. The entire prospectus not including exhibits was 435 pages. There’s no way in hell any financial analyst anywhere has read it in its entirety. I doubt any one lawyer or accountant has either.
In the context that Chinese corporate accounting is notoriously corrupt, BABA had $8.4 billion in revenues in its Fiscal Year 2014, which ended on March 31. It reported $3.7 billion of net income. The stock market values BABA at 24x revenues and 61x net income. The company also has $8 billion in long term debt, something which has not been openly mentioned. It has no assets other than rapidly depreciating computer software and $6 billion of “intangibles.” Because of the way in which BABA is legally structured, the shareholders do not have any legal ownership claims on the subsidiaries that generate revenue.
It is completely inconceivable that the SEC would have approved this stock for issue in the U.S. market 20 years ago. That the SEC put it’s meaningless “It’s okay to sell this stock to retarded U.S. investors” stamp tells us the degree to which our financial and legal system has become engulfed by the corruption and criminality of Wall Street banks.
BABA is the kind stock market nuclear waste that boiler room penny stock operators like Stratton Oakmont would stuff down the throats of helpless senior citizens and greed-crazed morons. It’s not the kind of garbage that, historically, any large Wall Street investment bank would have touched with a ten-foot pole. Although I can understand JP Morgan and Citi having no qualms about to selling BABA to anyone who picks up the phone call from their broker at those two firms, the fact that Goldman Sachs, Morgan Stanley and Credit Suisse were willing to sell this sewage to the public (historically these 3 firms left the boiler room rot to the sleazy penny stock firms in Long Island, South Florida, Denver and Salt Lake City and focused on real crime) tells us just how unethical and corrupted Wall Street has become.