
Alibaba's Accounting Is as Alarming as Enron's - altstar
http://fortune.com/2016/05/12/jim-chanos-alibaba-accounting/
======
ChuckMcM
I didn't find a lot of substance in this article, the message was basically
"Alibaba's accounting practice is opaque, so we don't know where the money
is." the reminder that in Arabian nights Alibaba was a thief seems to tie up
the narrative nicely. Not that I'm buying it.

That said, it is tremendously important to Yahoo! that they understand the
real value of Alibaba. No doubt it would be tremendously useful to have
transparency on where all the money is coming from and where it is going,
presumably these people use a recognized accounting firm to provide audited
results for people who want to know?

~~~
peloton
There isn't a lot of substance but the Enron comparison is awfully loaded. The
article specifically calls out the use of off balance sheet entities to hide
costs-- for people who follow this stuff, that immediately triggers memories
of Enron's use of special purpose entities and Lehman's Repo 105 off balance
sheet shenanigans.

------
doctorpangloss
What is more likely: that Alibaba is making up its numbers, or that Yahoo has
actually made one good investment in the last six years?

Ponder that thought for a bit. I don't know if you actually need to open up an
accounting book to know something's fishy :)

------
wnevets
>“What the company is really earning we don’t know,” says Chanos. “My
experience with Chinese companies is that what you don’t know is generally not
good news"

Makes sense to me, if it was good news why wouldn't they tell you?

~~~
hbcondo714
I don't think it's fair of the author to single out Chinese companies. Any
company based outside the US that trades on a public US stock exchange (ADRs)
files in a different fashion than US-based companies including requirements
disclosed and timing of the filing[1]

[1] [https://www.sec.gov/divisions/corpfin/internatl/foreign-
priv...](https://www.sec.gov/divisions/corpfin/internatl/foreign-private-
issuers-overview.shtml#IIIB1a)

------
trevelyan
Malls in China are starting to hollow-out because people are buying almost
everything online. Increasingly, you go to malls for the expensive stuff that
can be easily faked as well as for restaurants. So if Alibaba isn't recording
a lot of profit, that's because it's engineering ways to put money in useful
places, not because it doesn't have customers.

------
woliveirajr
Well, just because their accounts aren't as clear as expected it doesn't mean
they will go down or that they aren't profitable

~~~
benologist
The question posed in the article is how much is being stolen from investors
via pouring money into 'other' businesses that Alibaba created externally and
excludes from reports, citing their delivery operations as an example.

~~~
kbenson
"Stolen" might be a bit strong. They aren't being as open and they could and
should, but investing is gambling, there are risks. The information that they
weren't clearly showing all expenses is obviously there to be found, Chanos
found it. People might feel cheated, but unless laws were broken, this is just
a part of the market, and people need to keep that in mind when investing (or
lobby for changes in the law).

~~~
benologist
It's possible every penny is well accounted for, but the person being
interviewed doesn't seem to share that sentiment even pointing out that the
original "Ali Baba" was a thief. The other investor quoted said Alibaba's
paperwork looks "faked". They may have their own agendas, but Alibaba seems to
be deliberately avoiding any legitimate transparency.

~~~
kbenson
Another way to state or interpret what I said in my prior comment is "Unless
they actually have broken some laws, all they are doing is playing the game
better than most the investors." If they are breaking the law, then they've
defrauded investors. If they haven't, even if they've lied, all they've done
is just found a new loophole, and investors should have been aware that what
they were reading could have been a lie. it's not _fair_ , but that's never
been true about the market.

~~~
benologist
The suspicion around this company's accounting practices seems to predate this
article. We may find out the truth, and it might be nothing, if the SEC
investigates. But that may be hampered by the Chinese government prohibiting
audits by the US.

[http://fortune.com/2015/09/18/alibaba-faking-numbers-
hedge-f...](http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/)

[http://fortune.com/2016/02/05/alibaba-stock-pay-
disturbing/](http://fortune.com/2016/02/05/alibaba-stock-pay-disturbing/)

[http://www.barrons.com/articles/alibaba-digging-into-the-
num...](http://www.barrons.com/articles/alibaba-digging-into-the-
numbers-1455944344)

------
B1FF_PSUVM
> John Chanos, president of Kynikos Associates,

Spotted the professional cynic.

(Brilliant, making money out of it. The forerunner was famously dirt, live-in-
a-barrel, poor. But with the balls to ask Alexander to "stand a little out of
my sun.")

