Open $esame?

Unless your accounting firm recently assigned you to an on-premise audit in a remote parcel in Kazakhstan, you’re more than likely aware of the bonhomie surrounding the initial public offering of Alibaba, the Chinese e-commerce giant.

As advertised, the IPO now ranks as the largest in history at a mind-numbing $25 billion, an investor run that helped its stock surge some 38 percent in its debut. And from an investor standpoint, what was and is not appealing about a company that has a virtual and literal padlock on China’s web-based retail sector? Its founder, a 5-foot tall perpetually energized Eveready battery and Tai Chi disciple named Jack Ma began the company with $60K in capital out of a cramped space after tiring of his $15 a month salary teaching English to Chinese students.

I bring this up because a friend of mine at a brokerage firm recently offered me the chance to purchase shares of Alibaba, but since getting torched on a start-up oil venture in Colorado a number of years ago, I now perform a decent amount of due diligence prior to writing a check.

And what I found was a bit interesting.

So before you envision papering your walls with the proceeds of an Alibaba investment, you may want to first read the prospectus which you can get here.

Especially pay close attention to the part about risks related to doing business in the PRC – People’s Republic of China and the extent of involvement by the government with regard to allocation of resources, development and growth rates.

Basically that’s prospectus-speak detailing that, like it or not, the PRC will have more  than just a little to say about the company strategy. Now, imagine say, a prospectus for an offering of Microsoft or McDonald’s stating a similar caveat?

That would not exactly be an inducement for me at least to invest heavily in either, no matter how much I’m anticipating the release of Windows 9 or the latest offerings on the dollar menu. I’m not a believer in a government’s ability to run anything competently, let alone one with distinct totalitarian roots. For evidence, I steer your attention to the U.S. Post Office.

And while PRC has made admirable strides toward free market reforms, make no mistake: the government (read: Communist Party) still oversees much of the major businesses, whether directly or indirectly.

Not surprisingly, I passed on the opportunity and instead, boosted my IRA contributions. This way if something goes haywire, I only have myself to blame and not some government bureaucrat.