The View | Alibaba out of touch when it comes to winning over long-term shareholders

The only drama worse than a large-cap stock whose price has fallen to earth - and keeps on falling - is one whose management unleashes a "terminator" style investor relations offensive on a publication that takes a merciless position against the business and its share price.

Barron's published an excoriating cover story two weeks ago warning that Alibaba's share price could fall by 50 per cent. It said that Alibaba's business data was seriously flawed and even worse, asserted that management's forecasts were not credible. The article said one of Alibaba's biggest problems was the "seeming improbability of the growth numbers reported by the company" lately.

Listed companies, especially large tech companies, generally don't comment on their share price or analyst predictions. So when Alibaba's Jim Wilkinson, senior vice-president and head of international corporate affairs, aggressively attacked the story's "lack of integrity, professionalism and fairness", it hinted of desperation and anguish. After all, if Jack Ma Yun and his other executives are so concerned about building a long-term success story, why should they care about a short-term fall in share prices or comparisons to other stocks, no matter what the basis?

Perhaps lenders to Alibaba's recent US$4 billion share buyback programme for stemming the avalanche of shares coming out of lockup or the founders' US$2 billion margin financing for an investment office are sensitive to a US financial journal's ideas about a 50 per cent collapse in its share price. Or far worse, when the journalist has the temerity to openly challenge the integrity of its management team and the board's lopsided corporate governance, China's biggest e-commerce company feels the heat.

Barron's replied by conceding one factual error, but stood by the rest of its story. But Alibaba's over reaction suggests that its investor relations team is out of touch with the cultural and ethical challenges and obstacles that confront mainland Chinese companies and managers as they try to win the confidence of long-term shareholders.

People involved in the investor communications of mainland enterprises need to come to grips with difficult issues that will haunt them in a Western context.

Analysing and understanding the personal and business dynamics of mainland Chinese companies requires a different skill set than the one possessed by Western financial analysts. Financial analysts can only study financial information, so discussions with management can only orbit around financial topics and business data. They have no interest and ability to dig below the surface or judge managers. There are more hazards and risks associated with doing business on the mainland that meet the eye - and spreadsheet.