The Moral of The Ali Baba Story

Let’s be clear that Ali Baba is no child’s story as far as I am concerned. And I see myself having some affinity to the folktale given that my nickname in primary school had been Ali Mama, a long forgotten and preferably buried fact.

Firstly, it is violent in the number of recorded deaths, albeit violent ones and it ended in a grisly murder. Memory refresher : http://en.wikipedia.org/wiki/Ali_Baba.

An old timer in the stock market alerted to me a failed Ali Baba IPO attempt back when it started in the late 90’s which I have not been able to find much information about. The dot com burst resulted in Ali Baba finally listing in HK back in 2007 before delisting in 2012.  If I were superstitious, maybe HK is not such a good idea.

So markets are upbeat on the upcoming IPO and black market shares are supposedly trading at 10% premium, guaranteed delivery with no moratorium.

If Ali Baba were to list in Nasdaq, I say it would be a feather in the cap for them, being up just 3.82% this year.  But they are still keeping mum which is what investors should expect when they invest as a second class shareholder in a dual class share structure.

Half the Nasdaq companies, including the ADRs, are running at loss. With a market cap of USD 6.5 trillion, Alibaba’s USD 20 bio IPO (larger than Facebook’s USD 16 bio) would value the company at USD 168 bio which would be 2.5% of the Nasdaq with her 2514 other members.

The listing would cause a rout in the index when it finally materialises and rumours are adrift that it would be in the 8th month for reasons of superstition and yet none of the reporters in the West are aware that the 8th month of the Gregorian calendar is the 7th month of the Lunar calendar, commonly known as the Hungry Ghost month in Chinese culture (not sure if it extends to Beijing though).

If the April/May price action in the Nasdaq is anything to go by, we know that Alibaba has INFLUENCE indeed.

For a fund manager friend informed me then, it is market practice and discipline to make room for a new IPO especially index heavy ones. And if everyone is aware of that practice, there would be a scramble to get out knowing that you can buy cheaper subsequently. (Golly, what I would be give to have a friend on the inside – because it is strictly not insider trading if you were to sell other stocks no ? – to be verified)

This is the damage Facebook wrought in its time on the Nasdaq.

nasdaq facebook ipo

This is what happened when Alibaba news hit.

nasdaq ALIBABA ipo

Trouble is that Alibaba is keeping mum now about 1. the date and 2. the exchange which is either the Nasdaq or the NYSE which is pretty infuriating.

But if we keep a cool head, we know that he will have to list sooner or later and when the news hits, funds will start the routine dump to make room affair.

We know that black market is already quoting 110% and the shares are not even priced yet.

Thus a stock market correction should be in order if we follow the script.

Remember. Alibaba is a tale of gore and death besides the riches that he procured. But it would not have been possible without his faithful servant and I cannot help but feel a close connection with his maid given that I have just washed the car, did the laundry and swept 3 bags of leaves up.

Good luck !