The China Boom Story: Alibaba and the 40 Thieves

I suspect the Alibaba IPO may well prove to be the high water mark of the China Boom Story in more ways than one.
We all know the story of Ali Baba and the 40 Thieves. Poor woodcutter Ali Baba discovers the 40 Thieves’ secret cave where they stashed all their ill-gotten wealth. Various adventures follow, with the loyal slave girl being the heroine who repeatedly saves Ali Baba from death at the hands of the Thieves and their resourceful, cunning leader.
My favorite filmic depiction of the story is the 1934 film Chu Chin Chow starring Chinese-American actress Anna Mae Wong as the heroic slave girl. (Another Arabian Nights’ inspired fantasy also stars Wong as a loyal slave girl: the 1924 silent film The Thief of Bagdad with Douglas Fairbanks and Anna Mae Wong. Clearly, Hollywood’s favored role for Miss Wong was loyal “exotic” slave.)
On the current stage, the drama being played out is that of Chinese Internet company Alibaba, which is set to go public on the U. S. stock market next week in a staggering $21 billion IPO (initial public offering). Many market pundits expect the current rally in stocks to continue through next week, if for no other reason than to insure the investment banks dump all the Alibaba shares on a credulous public at full pop. Alibaba To Raise $21 Billion In Historic IPO.
The IPO share price of between $60 and $66 would peg Alibaba’s value around $160 billion.
Behind the rah-rah, Alibaba’s fair market value is problematic: What’s an accounting puzzle like Alibaba (really) worth? As the world’s largest e-commerce company prepares to go public, its murky financials don’t make it any easier for investors to figure out the company’s value.

This post was published at Charles Hugh Smith on SUNDAY, SEPTEMBER 07, 2014.