Molson Hart

5. This is the main point. If you look at my original tweet, I didn't say I'm bearing on JD, I said people underestimate the gov't risk of it going to zero either by government "assassination" or simple nationalization.

This whole conversation is stupid. I mean...JD is cheap because smart people know you can't trust the Chinese gov't. You know what else is cheap? Russia. It's cheap for a reason.

Yeah, that's a good point. Downside risk is just one part of the story. I'd say the other half is network effects. BABA is a lot bigger than JD and e-commerce marketplaces don't play catch up like retail does.

Taking a 1% stake is hardly nationalization. Most VIE structures which broke down were not govt-driven, but mgmt-driven (Alipay, GigaMedia, etc). Post-industrial revolution, any large country which industrialized copied their predecessors, and grew much faster as a result.

I think you vastly over-estimate the risk of nationalization (outright or implied) because you insist on a “heavy” discount. Unsure regarding your definition of “heavy” but lets say conservatively you mean 30% We don’t see 3 in 10 firms getting nationalized.

Like @TodayRSS mentioned, there are many Chinese firms which are valued highly, which does not support your point JD is cheap because of nationalization risk.

However, your other point regarding JD being cheap is due to it being smaller than BABA and network effects, is much more valid. I disagree with this point too, but its not relevant to our nationalization discussion.