Tech

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

(Updated )

Mark Cuban had a question for the U.S. president, and he took to @realDonaldTrump's favored communication tool to pose it.

The investor, billionaire and basketball fan was asking a rhetorical question, of course.

Cuban was referring to Alibaba Group Holding Ltd., and linked to one of many blog posts penned by a relentless, witty and deeply analytical critic of Jack Ma's empire called, unoriginally, Deep Throat.

Being a Gadfly, I went through Cuban's numbers for a bit of a fact check. Conclusion: he knows his stuff. But keep reading.

Alibaba's U.S.-listed shares have climbed 116 percent this year, taking its market cap to $486 billion by the close of trading Wednesday. That's equal to a $261 billion increase year-to-date. Given that the stock is up slightly this week, and assuming Cuban did his calculations earlier in the week, he's pretty much dead on.

Quite a Rise
Alibaba's market value climbed $261 billion this year through Nov. 22, in line with Mark Cuban's calculations
Source: Bloomberg

As for the 5 percent, he may actually be underplaying it a little, but Cuban didn't specify which stock market he's referring to, so there's some leeway. If he meant the NYSE Composite Index, that measure is up 12.1 percent for the year, adding about $2.61 trillion to its market cap. So Alibaba's gain is close to 10 percent. For the MSCI World Index, which tracks 1,652 global stocks, Alibaba's increase is equivalent to about 4.6 percent of the added value.

Cuban later responded to me, explaining that his 5 percent figure was based on Trump's own claim of a $5 trillion increase in stocks. The market value of securities on the NYSE (where Alibaba is listed) plus the Nasdaq has risen by a combined $4.8 trillion this year, so that figure is broadly correct.

All Rise
The total market value of common stocks, ADRs, REITs and tracking stocks listed on the NYSE has climbed $2.6 trillion this year through Nov. 22

It's where Cuban talks about trade that things get a little weird. He's right: The U.S. trade deficit with China was $34.6 billion in September, and 7.5 times that figure is $260 billion. Pretty close to Alibaba's rise in market value.

On Balance
The U.S. trade deficit with China tends to range between $20 billion and $40 billion per month
Source: Bloomberg, U.S. Census Bureau

But that data point is irrelevant to Alibaba's trade impact on the U.S. economy. Alibaba, including its Taobao marketplace, is primarily a platform for Chinese trading with Chinese. Alibaba's non-China revenue last year was 24 percent of its total, with even less -- 8.4 percent -- derived from international commerce, coming to just $2 billion. The remainder of its overseas sales came from digital media, entertainment, and cloud computing.

Bear in mind that Alibaba's revenue has little to do with its transaction volume, (aka gross merchandise value) -- a drum I have banged many times. In fact, Alibaba is primarily a media company deriving its revenue from selling ads to merchants.

Data on this is hazy at best, but given that so few Americans have even heard of Taobao or TMall, much less use them, it's fair to argue that not many U.S. shoppers are turning to Alibaba for help importing Chinese products. Jack Ma himself has said that just 2 percent of the company's sales come from the U.S., though its unclear if he meant transaction volume or revenue.

That said, Alibaba has become a valuable tool for small-business owners to source product, but I'd hazard that Amazon.com Inc. and Wal-Mart Stores Inc. are doing a better job of matching Chinese sellers with U.S. buyers. Meanwhile, Chinese people are using Alibaba to buy U.S. products such as iPhones.

Who Made the Money
U.S. investors made more than $190 billion from Alibaba's share price rise this year
Source: Bloomberg

Then there's wealth creation. More than 74 percent of Alibaba's New York-listed ADRs are owned by U.S. shareholders. That's $194 billion of increased market value from Alibaba's share price flowing to American investors, which is more than the country's aggregate trade deficit with China for the first six months of 2017. 

Mark Cuban, one of the world's smartest businessmen, knows there's a story to be told about Alibaba and the U.S. But he's going to need more than 280 characters to tell it.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(Adds detail from Cuban of his calculation in seventh paragraph.)

To contact the author of this story:
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Paul Sillitoe at psillitoe@bloomberg.net