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Why you shouldn't buy Alibaba: Pros

Alibaba shares hit the market Friday amid much hype, becoming the biggest initial public offering in U.S. history, but two pros are warning investors to stay away from the Chinese e-commerce giant.

For one, since it's an IPO, it's probably overpriced, Barry James, president of James Advantage Fund, told CNBC.

"When you look at initial public offerings, 80 percent of them lose money the first year," he said in an interview with "Power Lunch."

"You have this hype that we have today and you have this weird kind of governance. … So we think let the froth die and then there might be a better time to buy."

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That governance is what also concerns Mike Crofton, president and CEO, Philadelphia Trust Company.

Alibaba Group signage at the New York Stock Exchange during IPO, September 19, 2014.
Adam Jeffery | CNBC
Alibaba Group signage at the New York Stock Exchange during IPO, September 19, 2014.

"It is a strange structure and there are different accounting rules that are applicable in China that aren't necessarily compatible with our accounting rule," he told "Power Lunch."

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Plus, the government of China is always somewhat suspect, he added.

"I'm not sure that the average American investor knows what he or she is getting into if they were to invest in Chinese companies," Crofton said.

After initially spiking almost 50 percent in its market debut, Alibaba shares fluctuated in volatile trading Friday and briefly dipped below the opening price of $92.50.

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