By George Zack

Alibaba Group Holding Limited's massive impending IPO in the US, aimed at raising at least $20 billion, has its caveats too according to some analysts.
The range of Chinese accounting principles behind Ali Baba's operations that dwarf even the largest American retailers like Amazon.com, Inc. (AMZN) and Ebay Inc (EBAY), and shady practices such as listing counterfeit goods and the company's non-participatory corporate structure call for more scrutiny from US regulators, according to analysts.

The hype around Alibaba's debut on the US stock exchanges has alerted the likes of Senator Robert Casey, who said that US investors will be considerably more exposed to risk by investing in Alibaba as US investors do not enjoy the same protections against Chinese companies like they do for US based companies, such as transparency and legal guarantees.

Chinese digital companies like Weibo Corporation (WB) use a tricky variable interest entity (VIE) model dubbed the “Intricate Ruse” which allows Chinese regulators to see the company as Chinese-owned and to foreign investors, as foreign owned. This allows the company to lend limited rights to ordinary shareholders thereby consolidating the company's control within a few hands.

The Intricate Ruse, is precisely what led Hong Kong regulators to reject Alibaba's listing leading the company to consider listing itself in the US.
Moreover, for three years, Alibaba has been part of the US Trade Representatives "notorious markets" list for allowing shady or pirated goods to be sold on its websites. Alibaba escaped the list in 2012, when it announced that it was joining hands with the International Anti-Counterfeiting Coalition to tighten its policies relating to counterfeit goods.

Last year, Alibaba's product, Toaboa removed 15% out of 760 million products from its site that were claimed to be pirated or stolen, but Nintendo Co. Ltd. and American Apparel & Footwear Association continue to raise objections over the company’s removal from the notorious markets list, according to Bloomberg.

Then there are gray areas when it comes to Ali Baba's financials, which the Chinese government prohibits the US Public Company Accounting Oversight Board from reviewing.

The results of the IPO will define whether investors place more weight on these concerns or are just interested in the performance of Ali Baba.

http://www.bidnessetc.com/22652-secs-overwhelming-response-for-alibaba-raises-concern-among-investors/