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Strategies & Market Trends : The Art of Investing
PICK 46.60-1.0%Oct 30 4:00 PM EDT
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To: Sun Tzu who wrote (2045)8/20/2021 11:38:13 PM
From: Sun Tzu1 Recommendation

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kidl

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This article is dead on the money. As I had mentioned in an earlier post, the VIE structure is the main risk and affects all Chinese ADRs. If that goes away, you will end up holding an empty bag.

When it comes to valuing BABA, there is one thing that the author forgot about. Alibaba is the only viable public cloud in China. They have a cloud division similar to Amazon having AWS. This is both good and bad. The good is that when you buy BABA you are not just buying an ecommerce company, you are also getting a cloud and a logistics business.

The bad is that such a strategic platform is likely to attract additional government scrutiny. So in addition to the VIE risks, it is possible that the government might order the separation of the cloud business.

Without the messy political risks, BABA would be a stock to retire on and to leave to your grandkids. As it stands, it is mostly a trading vehicle. At least until the political headwinds change.
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