Apr 8, 2015 · 3 minutes

Remember the biggest US IPO in history? A little more than six months ago, the so-called Amazon of China raised $22 billion and commanded a market value of $230 billion – a figure startlingly large enough it made one wonder whether we shouldn't be calling Amazon the Alibaba of America.

But a little more than six months later, Alibaba the stock is looking rather meh. After the IPO, bullish analysts said the stock could double in its first year, a prediction that nearly came true several weeks later as Alibaba's stock soared to $120 a share from its offering price of $68.

After reaching that peak, the post-pop malaise that afflicts many mediocre IPOs dragged the stock down over the next several months. Alibaba has lost nearly a third of its value since peaking in November, falling to about $82 a share and prompting grimmer predictions of late that it will soon sink back to its offering price.

Which is all the stranger because Alibaba isn't some loss-plagued company with a copycat business model and no clear plan to monetize its business. It created an gigantic-scale, inventory-free ecommerce ecosystem where one never existed before. It went public with an operating profit margin of 47% and a rising portion of its revenue from mobile. Its active users rose 45% during 2014 to 334 million people – making Alibaba's customer base is larger than the US entire population.

So why is Alibaba so lackluster, given all its proven success and its still vast potential for growth? The answer has to do with concerns that Alibaba bears were raising ahead of the IPO, concerns that kept its offering price relatively low compared to other ecommerce companies: Reports of fraudulent goods for sale, possible clashes with the Chinese government, a complicated and murky corporate structure that benefited founder Jack Ma more than IPO investors.

As 2015 has progressed, many of these concerns have grown into real problems. Alibaba's Taobao site is, like eBay, an inventory-less marketplace that connects buyers and sellers. But like eBay, Taobao has been plagued with fraudulent listings. In 2011, the US Trade Representative's office listed Taobao as a “notorious” marketplace for fakes.

Ma has fought to eliminate the fraud and fix Taobao's image, but lingering controversies dog the marketplace. CNN called attention to the problem not long before the IPO. And sure enough, this January China's government singled out Alibaba for lax enforcement of illegal activity and released a damning white paper mentioning a meeting regulators had with Alibaba to discuss fraud.

Alibaba responded on an earnings call that the meeting with regulators, undisclosed in IPO filings, was a routine one. Joe Tsai, Alibaba's executive vice chairman, said the government's methodology in detecting fraud was flawed, prompting the rare step of a formal complaint against the agency involved. The white paper quickly disappeared from the government agency's site.

The episode suggests Alibaba is at once vulnerable to regulatory ire and can stand up to it. But what's clear is the counterfeit goods problem isn't going away, but instead becoming more visible to US investors. It's rare when a company has to interrupt its first post IPO earnings report to defend a controversy, so if anything this flare up only called attention to a controversy Alibaba wishes would go away.

Alibaba may have quieted Chinese regulators, but the incident spawned a class-action lawsuit that alleges the company overstated the health of its finances and business operations and that it failed to disclose the July meeting with regulators before the IPO, even as Ma, Tsai and the company sold 368 million depository shares in the offering.

Beyond those legal quandaries, Alibaba has been seeing analysts lower price targets as they scale down their expectations for revenue growth in coming years. Alibaba is seeing more users on mobile, but the take rates are about 60% of those on PCs. Government curbs on online lotteries are having an impact, as is the seasonally slow sales in the first half of the year.

Many analysts believe Alibaba is an important proxy for the Chinese ecommerce sector, but a flurry of bearish developments, coupled with the end of the lockup period for IPO investors, could weigh on the stock for a while. But the biggest concern is that revenue is growing more slowly than anticipated. One of the strongest selling points for the stock was it phenomenal growth in previous years, growth that the company was positioned to try and push into new overseas markets.

In the end, such developments may all be speed bumps that will slow the company down for a while rather than hurt its long-term potential. But they are speed bumps that bears forecast during the IPO. The bulls were expecting greater things. Alibaba has to manage these problems while growing quickly and investors are wondering how well it can try to do both.