Having had Alibaba.com as a recent client (helping them in the U.S.), I have had several years to watch its development.  A couple of years ago I visited the campus in Hangzhou which is both one of the oldest as well as the most beautiful cities in all of China.  The campus was impressive if not a bit sterile.  It was obvious then that Alibaba was a much more formidable operation than most Americans and westerners were aware.   Had you asked me then if Alibaba would go public on the New York Stock Exchange I would have thought that highly unlikely.  I remain surprised – pleasantly so, that Alibaba decided to have its IPO on the NYSE.

There are at least three reasons that could become huge impediments to Alibaba’s quest to be the biggest of them all.  Because let’s face it, that’s what Jack Ma really wants and his supporters within the PRC government will be doing what they can to help.

Reason #1…Disclosure.  Up until the IPO launches Alibaba has been able to hold back detailed information on its individual business units (Alibaba.com, Tmall and Taobao for starters).   In fact many on Wall Street have expressed concern at the thin amount of data that Alibaba has released to date in advance of the IPO.   This is no matter since it’s obvious to all that pay attention that Alibaba makes gobs of cash and has some of the most impressive margins a business of its size could ever hope to imagine.

Once the IPO has launched, Alibaba will be subject to SEC and other financial reporting mandates that will require a much higher level of transparency than it has ever had to provide.  When Wall Street gets to look under the covers it may not like what it sees.

Reason #2 – Google and Amazon are going to fight back.  Hard.  Alibaba has had a pretty free reign in China.   Sure there’s Baidu.com for search, Weibo for messaging (but both really only within China) and Tencent’s WeChat is poised to become a much more significant international player, but while there’s still a growth curve to be had in China as only 45% of Chinese people are online, Google, Amazon, and yes even Facebook have a huge head start in the international arena.  It will not be as easy to conquer the world as it was for Alibaba to conquer China.

Reason#3 – Payment security.  Alibaba.com, Taobao and TMall all rely on the Alipay secure payment system (conveniently conceived and administered in large part by Mr. Ma who fought hard to keep control).   Alipay has thus far proven to be a very secure and effective payment system and most Chinese make everyday payments using their mobile devices in a way Americans could only dream of.   However, and this may be a big maybe, if there were to be a breach of security in the Alipay system even temporarily the loss of confidence would be crushing for Alibaba and the whole thing could come crashing down like a house of cards.  It may be highly unlikely, but it isn’t impossible.

Despite all that I am bullish on Alibaba and its forthcoming IPO.  The company has done an overall great job in being both particular and methodical in forging its growth path over the past seventeen years.   I just keep in mind that with seemingly everyone on the Alibaba bandwagon when something seems too good to be true it should put your radar on extra-sensitive.

Will you be buying into the Alibaba story?