Author Topic: JD - JD.COM  (Read 5134 times)

lucasnascimento

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Re: JD - JD.COM
« Reply #20 on: June 07, 2018, 05:00:02 PM »
Interesting thread, the short rebuttal was a good read.  Both sides seem to have good points.

I haven't followed this name closely, I know it's a hedge fund hotel, but a short based on valuation seems a little shaky here.

China is an interesting market.  Before the 08 crash there was a LOT of China hype too, no one could go wrong buying Chinese equities.  It's a strangely fascinating thing, I get that it has 1b+ people and is undeveloped.  But so is India, and India gets zero investment attention.  I understand that non-Indians can't buy Indian equities, but China is the same.  You're buying into a VIE that has a contractual relationship with the underlying entity.  Why can't they do this in India?


Do longs look at this as a buy and hold forever deal? Or is it more of a growth isn't being valued, so you buy until it's valued?

It amazes me how readily investors in Chinese companies via this structure disregard the risk of waking up one day to find that they now own nothing more than a tiny interest in a Cayman Islands PO box. Or, less flippantly, the principal-agent problem already looms large in investing, why invest in a situation in which the "agents" (management and the Chinese communist party) are completely beyond the reach of the "principals" (foreign investors)?


To address this issue, take a look at https://www.wsj.com/articles/a-spark-that-could-light-up-chinas-internet-giants-1520247521, http://www.scmp.com/business/companies/article/2139703/beijing-fast-tracks-foreign-listed-chinese-tech-firms-share and today's https://www.ft.com/content/7e243658-6a0c-11e8-8cf3-0c230fa67aec

Since Chinese CDR investors will be subject to the same VIE structure, many US investors would be more comfortable investing in these companies (the thinking being that the Chinese government wouldn’t do anything conniving to its own citizens). Also most people invest into what they know better. It is fair to say that one of the factors many of these Chinese US-listed tech companies are trading at lower multiples than they should be (Charlie Munger shares that thinking https://www.cnbc.com/2018/05/07/charlie-munger-chinas-best-companies-cheaper-than-us.html), is due to the fact their Chinese customer-base can’t invest in these foreign-listed shares due to capital controls, and US investors have never used these platforms.

All in, this is likely to be a great catalyst for the stock going forward.
« Last Edit: June 08, 2018, 05:58:24 AM by lucasnascimento »