NEW YORK (Real Money) -- The last thing this market needs is an initial public offering from Alibaba. I can't even begin to tell you how many things can go wrong, how many bells can go off and how much havoc there could be with this deal.
It may be the single most fraught part of this stock landscape.
And it can't be prevented. It's going to happen. And the odds of it happening in any orderly, positive way seem so long right now that you have to wonder whether the Alibaba IPO wasn't put on Earth to ensure this now-broken bull market in technology and e-commerce not only dies but stays dead.
First let's deal with the symbolism. Right now, the size of this deal could rival the $19.6 billion Visa (V) deal or the $16 billion Facebook (FB) IPO. Visa? The first thing you should ask yourself when you hear talk of that size is, "Where is the money going to come from?" The answer: from Facebook, from Amazon (AMZN), from eBay (EBAY), from Google (GOOG) and from the rest of the most struggling cohort in this marketplace.Now, let's say the deal exceeds Visa and Facebook in size. Can you imagine how many times you will have to hear, "A Chinese Internet IPO that's the biggest deal ever -- doesn't that have to mark a top?" It's such an easy question, and it will be asked so many times that I think it could actually become self-fulfilling. I could see myself saying it a half-dozen times today alone. It gets worse. Sure, "Alibaba is synonymous with e-commerce in China," as it says in the offering document. Absolutely, this company is "China's largest online shopping destination" with China's "most popular mobile commerce app." Yes, it had $248 billion in total gross market value revenue, more than that of Amazon and eBay combined. It received 11.3 billion annual orders from 231 million buyers, including 136 million mobile monthly average users in the still-very-undeveloped retail market in China. It does have a fabulous ecosystem, with 620,000 marketing affiliates and 980,000 direct and indirect cloud customers. There's also the 57% revenue growth at Alibaba -- faster than that of Facebook -- and that growth seems to be accelerating as more and more Chinese get on the Internet and go mobile. The company has a one-day business that crushes our Christmas gift-giving. Yes, Singles' Day, on Nov. 11, generated $5.8 billion in sales, or 5 billion packages from 254 million people. Amazon would kill for that kind of holiday traffic. Most noteworthy of all, Alibaba is extremely profitable and has a gigantic gross margin of 47%. The company made $3.1 billion in profit for the first nine months by taking a huge cut on each order, a great deal of it coming from a search engine that's the envy of Google. But if you read through that offering document, the only thing you should be thinking about is that holders of Amazon, Google, eBay and Facebook will be tempted to sell their stock in order to pick up Alibaba. It is one gigantic magnet that will suck out capital from all over the place, as there just isn't enough freed-up money in the entire marketplace for this one. These stocks -- whose metrics are pretty much all inferior to those of Alibaba -- are all for sale, anyway, before this deal has even arrived. It's become common parlance that all of these stocks are bubbles, anyway, that are all one step away from the short-selling posse. Alibaba should tip them all into vicious sell mode as the money pours from them to this deal.
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