When Morgan Stanley (NYSE: MS) took E-Commerce China Dangdang (NYSE: DANG) public at $16 six months ago, CEO Guoqing Li was ultimately livid.

The stock opened at $24.50, closing at $29.91 on its first day of trading. A month later shares of the Chinese e-tailer hit a high of $36.40. Li took to SINA's (Nasdaq: SINA) popular microblogging site Weibo to vent his frustrations over the money that was left on the table through the underpriced IPO.

"I am here openly criticizing investment banks, criticizing Morgan Stanley," wrote Li, as retold by The Wall Street Journal's Digits blog. "What? Morgan Stanley can't be criticized? Not be cursed? You foreigners' flunky!"

Well, now that Dangdang's shed 44% of its peak value, it may be a good time to revisit Li's criticism.

The rise and fall of a Chinese e-tailer
Dangdang closed out last week at $21.07. That's still a healthy premium to its original $16 debut, but it's getting hard to argue that Morgan Stanley let its prized clients mug Dangdang. In fact, when digging into Dangdang's quarterly report from Friday morning, one has to wonder who's stiffing whom here.

Net revenue climbed 53% to $105 million. Media sales -- which still account for all but a quarter of all revenue -- climbed 34%. General merchandise climbed a heartier 162%.

There's nothing wrong with Dangdang's top-line growth, but worrywarts will find plenty to nitpick farther down the income statement. Net income may have tripled, it still adds up to just $0.5 million. It's hard to get excited about net margins that clock in just shy of 0.5%.

Dangdang is often called China's Amazon, but the comparison isn't fair -- to Amazon.com (Nasdaq: AMZN). Bears love to pick at Amazon's razor-thin margins and lofty valuation, but at least the global e-commerce leader comes off as a relative performer with its nearly 4% in net margins during the same three seasonally soft months. You don't want to even begin comparing the revenue, cash flow, and earnings multiples.

Bulls who feel that Dangdang will make up for its meager margins in volume may want to bump their heads against its paltry $1.2 million in adjusted EBITDA. At 27% growth, this figure didn't even keep up with top-line expansion.

Dangdang has the equivalent of 83.8 million shares outstanding. Is this really a $1.7 billion company?

Something borrowed vs. something new
Dangdang plans to push into apparel later this year, but this is a cutthroat industry. Mecox Lane (Nasdaq: MCOX) went public last year as an online platform for apparel and accessories in China. It's now trading for less than half of its $11 IPO price.

Zuoan Fashion (NYSE: ZA) and China Xiniya Fashion (NYSE: XNY) have gone public over the past year. Both Chinese apparel companies are also busted IPOs, trading for less than what their underwriters got from the first wave of public investors.

Is this really where Dangdang wants to expand? You don't hear Mecox Lane, Zuoan, or Xiniya bellyaching about their underwriters leaving money on the table.

Dangdang obviously needs to prove that it's about more than just low-priced books, but just because it's where Amazon was circa the mid-1990s doesn't mean that it will evolve into China's general e-tailer of choice.

Margins aren't likely to get a whole lot better in the near term. Dangdang is pushing same-day delivery in seven major cities to satisfy the need for instant gratification. This is aggressive, but are consumers willing to pay the true cost of speedy shipments, or will this be another margin-munching move?

Dangdang's worth watching, and it may very well grow up to be worthy of the "China's Amazon.com" tag. However, at $1.7 billion, it's just not worth buying until we get clearer visibility or meatier margins.

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