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Greenberg: Here's the real problem with the Alibaba IPO

Shares of Alibaba are about to hit the market in what looks to be the biggest IPO in history. But is it too risky despite all the hype surrounding it?

The China-based e-commerce company is anticipated to raise an astounding $21.77 billion. With shares priced at $68 each, the valuation of the company will be at around $167.62 billion.

[Yahoo, a partner with CNBC in "Talking Numbers," owns 23 percent of Alibaba before the offering.]

(Read: Alibaba prices IPO at $68 a share)

Some are even more enthusiastic. "Someday, Alibaba will trade at 15 – 20 times earnings," said Business Insider editor-in-chief Henry Blodget on CNBC Thursday. "The stock could easily trade to $100 and be justifiable."

However, another market watcher says the deal is too complicated for the average investor. Herb Greenberg, a CNBC contributor and Editor of the Reality Check Research Report, said Alibaba is "too darn complicated" and buying stock in the company could lead to trouble for investors.

Particularly troubling to Greenberg is thetangled web of relationship between the company and various related parties, affiliated entities, and variable interest entities. In turn, many of those are tied to Alibaba founder Jack Ma, now the richest man in China.

"This is a very opaque company; it's very difficult to understand," Greenbergsaid. "[If] you go from page 112 to 116 in the prospectus, you go through a series of related entities that make your head spin. You see a loan the company made to another company Mr. Ma is associated with and you see the company saying that they can't even assume that Mr. Ma will act in the interest of the company."

All of these should be worrisome signs for Alibaba investors, according to Greenberg. "If one day you wake up and something doesn't quite make sense here and stock isn't what you thought it would be, don't say that you weren't warned," he said. "Anything that's too opaque sometimes is opaque for a reason."

(See: Full CNBC coverage of Alibaba's IPO)

Alibaba's revenue ($2.5 billion in the second quarter of 2014) may also be in trouble, if Greenberg is correct. While buyers on Amazon.com may have warranty issues with sellers, Greenberg believes customers of Alibaba are at risk of purchasing goods from Chinese factories with little or no oversight and questionable practices. "You don't know what the quality of the product is actually going to be," he said. "That's a potential liability down the road."

Though company had a net income of $2.3 billion for the first half of 2014 excluding one-time gains, Greenberg also worries about the integrity of Alibaba's bottom line numbers. "You better hope that if it grows, it's growing based on real numbers that can be tracked back," he said.

To see the full interview with Herb Greenberg on Alibaba, watch the above video.

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