Good luck with those 40-year Alibaba bonds

For investors, sleepless nights come with the territory. But 14,600 of them? That’s what those gorging on the 40-year tranche of Alibaba’s epic $7 billion bond sale Thursday may be courting.

It’s the largest-ever sale in Asia by a non-bank issuer and the longest fixed-maturity instrument by a mainland company. Those buying 40-year paper get a yield 1.58 percentage point over comparable government debt – not much, all things considered.

Chief among things to consider is the political risk hovering over Jack Ma’s e-commerce juggernaut.

However, it’s a no-brainer for many investors, betting on the company perhaps most on the front lines of China’s consumer boom.

Founder Ma calls Alibaba the “everything company,” and with good reason. He’s not just out to beat Amazon’s Jeff Bezos; Ma wants to create the biggest marketplace for goods, logistics, supply chains, finance, communications, travel, you name it.

Ma’s Alipay service alone should have Chinese banks wondering if they’ll have customers in 10 years.

The problem is Beijing’s own ambitions to control the tech sector.

All Amazon, Apple and Microsoft need to worry about, for the most part, is business risk. Ma has an added a problem: his conglomerate thrives on monopolies across sectors that exist at the pleasure of Xi Jinping’s Communist Party, ones vulnerable to the whims of political priorities.

There are really two issues here. The first is how President Xi, for all his lip service about trusting market forces, is tightening the noose on successful conglomerates.

Along with scrutinising HNA Group’s overseas deals, Beijing is mulling taking equity stakes in tech stars from Tencent to Weibo to Alibaba platform Youku Tudou.

As Beijing grows fearful of losing control of globally acquisitive names Anbang Insurance, Dalian Wanda, Fosun and Zhejiang Luosen Neili, its hard not to wonder if China is having a Russian oligarch moment.

As Beijing grows fearful of losing control of globally acquisitive names Anbang Insurance, Dalian Wanda, Fosun and Zhejiang Luosen Neili, its hard not to wonder if China is having a Russian oligarch moment.

The second may be unique to Ma. His latitude to grow market share and sustain his New York-listed share price could rest more and more on walking the Beijing line.

Sure, Ma, a key face of the “new China” gets somewhat of a pass as he rubs shoulders with world leaders and Silicon Valley’s best and brightest.

Ma is a cagy dealmaker and innovator, and if anyone can walk this tightrope, it may be the English teacher-turned-billionaire.

But it could all come crashing down if Ma strays too far from party priorities. Do investors really want to spend the next 40 years hoping for the best with just 158 basis points of reward?

How, for example, can Ma juggle Beijing’s demands for users’ purchasing trends, browsing histories, social-media activities and personal data with western investors clamoring for increased independence from Beijing?

In 2016, remember, China’s state-run media treated Alibaba to a bit of bad press. The stories on fake goods sold on Ma’s sites are a bit like Japanese media going after a Tokyo sushi restaurant for not cooking its fish.

Regulators also clamped down on Alibaba food-delivery arm Ele.me, an episode that had pundits wondering of Beijing was reminding Ma who he really works for.

Last week, I spent a few days in Hangzhou, the eastern city in which Ma created Alibaba. And at the moment, it seems ridiculous to bet against China’s most globally-known magnate. Or a company that has a bold vision for where it wants to be five, 10, and 20 years from now.

But political risk runs both ways. Might Donald Trump’s “America First” ideology limit Ma’s expansion plans into the nation in which Alibaba is listed?

Then there’s the economy. Ma’s colossus is as big a leveraged bet on China beating the middle-income trap as any.

If China’s debt-fueled boom comes to a nasty end, or stimulus efforts fail to produce growth in the neighborhood of 6.5%, Alibaba’s stocks and bonds could be in for some wild days. Only 14,597 to go.