The "Call"....and an Open Letter to Securities Lawyers Everywhere.....

Well, last week I took some valuable time out of my jam packed schedule to try to work with the Alibaba analysts in anticipation of the earnings call.  What can I say, I like to help whenever duty calls.  I'm a "giver".  Anyway, I have to say, after a couple of reaching-out-hands-across-the-water efforts....it didn't seem as though they wanted my help at all.  I was shocked....

Here's the email I sent in an effort to try to rev them up and point them in the right direction for the upcoming investor call.  I'm no Tony Robbins, but hey, I gave it a shot:

From: DeepThroatIPO

Sent: Wednesday, August 22, 2018 12:22:47 AM
To: Fan Liu <fan.liu@ghsl.cn>; Alicia Yap <alicia.yap@citi.com>; Alex Yao <alex.yao@jpmorgan.com>; Wendy Huang <wendy.huang@macquarie.com>; Thomas Chong <thomas.chong@credit-suisse.com>; Eddie Leung <eddie.leung@baml.com>; Chi Tsang <chitsang@hsbc.com.hk>; Gregory Zhao <gregory.x.zhao@barclays.com>; Piyush Mubayi <piyush.mubayi@gs.com> Youssef.Squali@SunTrust.com; Grace.H.Chen@morganstanley.com; jerry.liu@ubs.com; mark.mahaney@rbccm.com; Anne Stevenson-Yang

Subject: Re: Upcomming BABA Investor Call

Hmmmm.....I've not heard back from any of you....that's strange......it's not like my work is a secret anymore.  If you take a minute to Google "Alibaba 20-F" my work comes up 5th out of 43 million results......Wolf Richter put it out there....great guy...perhaps you know him?.

Anyway, I was hoping for some insightful questions from at least a few of you.... or perhaps that you might at least send me the perfunctory "thanks for your interest" email response while kicking this up the food chain to your respective bosses for some guidance.  That's probably what I would have done....while carefully documenting the communication(s). 

I've also learned over the years that these career decisions are usually very difficult.  Your life can change in the blink of an eye....for better or worse depending on your choices.

That said, I've also been in "Corporate America" long enough to have seen some really good people get unceremoniously thrown under the bus when big fat financial turds plop into the dumper.  It's BS.....I know....it's not your fault...but it's the world we live in.  Blame must be delegated.  Isn't that right Mark?

By some odd twist of fate, you have all been charged with the daunting responsibility of analyzing this beast we call BABA.  You are the point men/women at the epicenter of the most incredible financial fiasco in history. 

But, from my vantage, and I don't mean to be so blunt, but as a casual observer, it looks like, collectively, you are all standing on the curb distracted, as the biggest financial Greyhound in history is hurtling toward your bus stop with no brakes.  Sadly, there will always be folks in your organization(s), who are more than willing to give you a shove once the bus gets too close to them.....but you already knew that.

Hopefully, it will be a really informative and lively discussion on Thursday.  

All the best.....

Well.....not that it was all that surprising, but I never heard back from anyone.  I guess they were comfortable in forging ahead without my help, insight and guidance.  I was at least hoping, during the Investor Call, they might have been a little more aggressive, bringing up some of the amazing accounting issues I've been discussing over the last few years.  After all, you know you are on the right track when you get a Jeff Skilling "Asshole" response.....

That said, perhaps:

1.) The Analysts got the email and chose not to read it? (Only Fan Liu & Chi Tsang emails were returned as undelivered.)
2.) Perhaps their company policy is not to respond? (Understandable...discussing non-public info prior to an earnings call is a problem.  Which analysts are all well aware of....or at least should be.)
3.) Perhaps they got my email, looked it over and kicked it up to their respective bosses?
4.) Perhaps they read it with great interest and used it as the framework for their Investor Call Q&A?

Sadly, until and unless subpoenas are issued we'll never know what actually happened.

The Time Line

So now let's take a look at what happened once the YUGE! "61%" number hit the street at 7:30 AM on Thursday August 23rd.  Pre-market (presumably neophytes vs. insiders) generally went nuts, pushing the opening number up $7.00, to $184.00 from the prior day close of $177.00.  Once the market opened, BABA average daily volume (20 Million shares +/-)  was traded in roughly the first hour of the trading day at about the $184.00 number, occasionally caressing $186.50 with 2x average daily volume traded by 11:00AM.

Here are the links to the foldurol that caused all of the initial hubbub....

Press Release:
https://www.alibabagroup.com/en/news/press_pdf/p180823.pdf

Webcast:
https://edge.media-server.com/m6/p/8atk8jbj

Presentation
https://www.alibabagroup.com/en/ir/presentations/pre180823.pdf

6-K (Filed with the SEC on 2018-08-23 16:29:54 - "end of day")
https://www.sec.gov/Archives/edgar/data/1577552/000110465918053369/a18-21099_1ex99d1.htm
Now, of course, once "professional" investors and commentators had a chance to analyze the presentation, and most importantly the Q&A of the investor call, we see that the mood, during the day, quickly evolved from euphoria to "what the hell?" and BABA eventually ended the day down $5.75......a $15.00 swing from top to bottom.  For example, Clay Chandler (Time), and Tim Culpan (Bloomberg) both did a nice job of parsing through the numbers.

 
The reason that this happened (among other things) has to do with the difference between Professional investors and Amateur investors.  A "Professional" investor is a savvy, intelligent person who is capable of reading between the lines and deciphering the difficult language and nuances of these investor calls.  An Amateur Investor is, well, not so much...

I also want to acknowledge that the Analysts on the call did a fantastic job of probing the inner meaning and real implications of management's comments.  Based on what's expected from analysts today, they did an AWESOME JOB of signaling the markets and Professional Investors as to what's actually going on!

First, not once (with the exception of Alicia Yap at Citi and her "congrats on 'solid' results" comment) did any analyst offer any orgasmic adulation regarding the quarterly results.....baby steps.  (Note: In today's vernacular, the term "solid results" usually refers to a business teetering on bankruptcy which managed to somehow reduce the quarterly loss.) 

Second, the Analysts bravely and cleverly walked, and never crossed, the ever-so-thin line between pissing management off, getting tossed off the call, risk being referred to as "that asshole analyst" on Twitter forever...... and actually doing their job.  Bravo!

As you might suspect, the problem is, that we live in a world where everything is a "Strong Buy".  Today, a "Strong Buy" can mean anything from "Hey....this stock is actually a strong buy! No kidding!" to "Geeezzz....run for the hills!".  That said, it's become all the more important to understand the subtle nuances buried in the dialogue between the Analysts and management on these investor calls, to differentiate the levels and gradations of "Strong Buy".

To that end, I think it's only appropriate, as a public service to Amateur investors and the investing public at large, that we deploy my patented Dick Fuld Banker-Speak Translator (BST),  to fully analyze the implications of the Analyst Q&A on the Alibaba Investor Call.  The BST will read between the lines, probing what the analysts were "really" asking.  As usual, management's responses were largely irrelevant, so we'll ignore them for now.  Feel free to read the full text of the entire call courtesy of Seeking Alpha.   I've posted the full text and the link to the transcript at the end of this post.

The eight (8) Analysts on the call with speaking parts in this awesome show of solidarity were:

Analysts

Eddie Leung - Merrill Lynch

Alicia Yap - Citigroup

Grace Chen - Morgan Stanley

Thomas Chung - Credit Suisse

Mark Mahaney - RBC Capital Market

Gregory Zhao - Barclays

Wendy Huang - Macquarie

Alex Yao – JPMorgan


Here are the Eight (8) hard hitting, laser focused Questions they asked:

Q – Eddie Leung - Merrill Lynch

Good evening. Thank you for taking my question. Could you share your thoughts first on the e-commerce competitive landscape given the fast growth of some of your peers in the lower price point market so to speak? Just -- many years ago, if you remember, Taobao also started more in the lower price point market then developed into today's scale. So just wondering, how you think about the difference today versus many years ago? And then if you guys can -- could you also comment a little bit on the outlook of your customer management business. There has been a bit of deceleration, of course, we know there is a high base affect. But any color going into second half of this year would be helpful. Thank you.

Eddie's Question (BST) Translation: Hey guys, I don't mean to be so harsh here, but what the hell is going on with your margins?  When I compare your operating metrics from a year ago by quarter, I see that you're operating margins have decreased from 38.8% all the way down to 12.5%....and since you don't break anything out by business segment I have no way of knowing what's going on.

From what I can see, "New Retail" means "No profit".....are you following the Amazon model where we can expect that you won't make any real money for a couple of decades?

Q - Alicia Yap - Citi

Hi, good evening, management, Joe, Daniel and Maggie. Thanks for taking my questions and congrats on solid results. I have some follow-up on these combined online core commerce. So with GMV growth and commissions lightly to experience potentially high base as well from last year, we see CMR also lapse out a tough comp. I think management previously commented about the increasing page view and time spent on the numbers of the recommended feed pagers. So are we still on track to introduce new potential some additional add lows to those second lending pages later this year? And also second question quickly is just, can you reconcile -- help us reconcile the 34% physical GMV versus the 55% commission revenue growth. Is that implying the take rate actually increasing? Thank you.

Alicia's Question (BST) Translation:  Even though you don't disclose GMV on a quarterly basis anymore, you put a growth rate in the press release (even though we don't know what it's grown from...) and for some reason Maggie talked about it growing 34%, so even though you've already told me in the dress rehearsal before the call that the take rate isn't actually increasing, I thought I'd go off the reservation and ask it again so you could again explain to the investing public how sales "commissions" apparently have no relationship to the amount of goods sold on the platform.  

Q - Grace Chen - Morgan Stanley

My question is about the New Retail business. Alibaba has been doing several mergers and acquisitions, and also has been sending out Hema and partnerships with various companies to lay out the foundations for the New Retail business. So I'm wondering is there any -- is there still any missing parts in your business portfolio to implement your New Retail strategy? And after the recent merger and acquisitions, what is your critical next step to execute the New Retail strategy? Thank you.

Graces's Question (BST) Translation:  Hey, from the latest 20-F (page 118)  we know that you've created about 600 new legal entities over the last two years under your "Enhancement" program,  getting more friends, family and political cronies involved in the dilution of the Capital Structure.  So, I guess my question is "how long is this bullshit going to go on?"
   

Q - Thomas Chung - Credit Suisse

My question is about food delivery business. Can management comment about the competitive landscape and our strategies and becoming the number one in this segment? Thank you.

Thomas Chung (BST) Translation: Geezzz....I need to talk about something irrelevant so as not to tick off management, while at the same time, signal to the market that I don't want to talk about the financial results.   I wish I never would have got that stupid email from DeepThroatIPO....what a pain in the ass that douche bag is.  And now, my boss told me I couldn't call in sick so I actually have to ask a question on this fu@#!ing call.  Let's see....Food delivery!....yeah! That's the ticket.  Never mind that the Ele.me/Starbucks/Hema/Koubei thing is an insignificant part of their business, probably generating losses and is mentioned only in passing, without numbers on page 3 & 4 of the press release, and I only have one question to ask....FOOD DELIVERY! THAT'S WHAT I'M GOING TO GO WITH!

Q – Mark Mahaney - RBC

I wanted to ask about the sustainability of the digital media revenue growth. It seems like you had a nice impact from World Cup there. Could you talk about whether some of the newer customers or some of the newer business that came out of that event whether that looks like its sustainable, whether you -- those are new customers that will stay with the service. Anything you can tell about what their activity has been like post the World Cup? Thank you very much.

Mark Mahaney (BST) Translation:  Geeezus Christ!....now I've gotta follow Tom's lead....I gotta let the market know that I don't want to talk about this mess.....maybe I should talk about Share Based Compensation (SBC), maybe it has decreased significantly in the quarter in a relentless effort to control costs?......Oh Crap!...outstanding shares have actually increased another 15 million shares (US$ 2.7 Billion @ $180/share)...I can't talk about that.....how about "digital media" and the World Cup?....yeah!....that's it....there are no actual numbers released and it's a touchy-feely topic.  Everybody loves sports?...right?  Oh wait.....Digital Entertainment Revenue only increased US$63 million (7%) since the March Quarter so the World Cup couldn't have had that much of a Revenue impact. Professional Investors will see what I'm doing....They will see that I'm signaling that this is a God-awful cluster-filing .  I can't believe I'm in this mess.  After that Facebook thing at Citi blew up I really needed this gig.....and now I'm stuck in the middle of this....

Q - Gregory Zhao - Barclays

My first question is about your international -- some international brands, which, during the quarter, more international brands coming on to your Tmall marketplace. So how shall we expect the advertising and the commission revenue contribution from these new players? And how shall we expect growth trends going forward? And very quick follow-up is on your 88 VIP. So how do we expect the membership to integrate your existing services and improve user engagement? And can you share some initial metrics of the business? Thank you.

Greg's Question (BST) Translation:  Ok....US Shareholders should love it when we talk about "international shit" that they understand.  I'm really hoping, even though there's very little in the press release talking about International Brands, that maybe management will talk about something interesting.  Maybe they'll disclose some of the sales of the brands listed in the TMall "Luxury Pavilion".  They mentioned household names like MCM, Moschino and Giuseppe Zanotti in the filing.  Of course, I'm not a fashionista, but I have no idea who these retailers are. I tried to look these companies up in Wikipedia, but the Wikipedia pages indicated that "This article contains content that is written like an advertisement. Please help improve it by removing promotional content and inappropriate external links, and by adding encyclopedic content written from a neutral point of view." which usually means that there's some sort of issue verifying the veracity and background of these International Fashion Icons. When I go to the websites, Moschino.com (an Italian designer that's a public company listed in Hong Kong?) and GiuseppeZanotti.com (which oddly enough has a few storefronts scattered all over the world but only three in Italy) they look a little...well....funny. I'm sure everything's Ok though, It would be really weird if Alibaba Management allowed fake businesses to be listed in an SEC filing. Here's the T-Mall Luxury Pavillion page for Moschino (below). 

Oh Man.....I know why I've never heard of Moschino.....they really don't have much of an International presence at all.....per their website they only have two stores in the US. Their store in LA at 8933 Beverly Blvd West Hollywood, Los Angeles United States, and their flagship store in New York at 73 Wooster Street, New York, New York, United States. Geeezzz ....no wonder I've never heard of these guys....when I look at Google Maps the flagship store on a NYC side street looks, well, kinda small and empty.....

Then when I use Google street view to look across the street, the neighborhood looks, well, kind of dumpy....

I was really expecting that an International Fashion Icon listed in an SEC Filing from one of the largest businesses the world would be up on Fifth Ave over by Tiffany's, Prada and the Trump Tower....probably just that "new retail" concept kicking in.  

Well Moschino is apparently selling lots of cute teddy-bear T-Shirts for US$307.48 each all over the world now. I think it would be really interesting to know how much volume MSM, Moschino and Giuseppe Zanotti are doing at these flagship stores since, by definition, it must be material as these businesses are listed in the filing.  But sadly, it wasn't disclosed.  Anyway, I don't see stuff like this when I google Prada or Armani, so I suppose it couldn't hurt to ask about it...

Q - Wendy Huang - Macquarie

Two very quick questions. The first, your revenue growth is very strong yet the adjusted EBITDA growth was only the 13% this quarter. And given that you've mentioned the New Retail's margin was structurally different from previous. So should we expect the EBITDA growth to stay at the current level for extended period of time? And second, very quickly, on your overseas strategy so there has been some new reports talking about US$5 billion investment in the Indian market, in the Reliance Retail. So can you give us update on your overseas expansion and investment? Thank you.

Wendy's Question (BST) Translation:  Hey guys I want to elaborate on Eddie's question above re: the erosion of margins, but I'm going to coyly rephrase it as a reduction in EBITDA growth.  How long is this going go on and how bad will the margins eventually get?  I also know that you don't have any interest in Reliance India but since your PR department keeps releasing these little nuggets to generate enthusiasm from Amateur US Investors, I at least want to hear you deny it in the Investor Call.   (Note: Wendy clearly went off the grid on this one.  She wasn't copied on my email, is new to the group, and most likely won't be invited back for the next call.  It's a shame, we'll miss her.  Let's wish her all the best wherever her career takes her.) 

Q - Alex Yao - JP Morgan

Okay. So number one, for the formation of the local service holding company, why do you want to seek external investors and the funding source? Number two, in light of the consolidation of Koubei, and more investment in Ele.me, can you talk about the financial impact in FY 2019 from this local service holding company? Thirdly, in addition to investments in Ele.me, are there any other areas that you think it will worth investing in terms of the local delivery? Thank you.

Alex's Question (BST) Translation:  Yet another "Enhancement"?  Are you kidding me? Softbank AGAIN?  Other than the future write-ups and associated/expected future valuation gains, why do you need to get Softbank Involved on a deal like this?  I know Masa Son's.... ummm..."advice" will add all sorts of valuable insight to the transaction.  He's done an amazing job personally redesigning Sprint's 5G Network on the back of a napkin, refrained from self immolation in public forums and no longer lies about his golf score, but that doesn't make him an indispensable part of this fire drill.  This type of consultation is, of course, not unprecedented.  It happens all the time in China.  As I recall, as a parallel to Western financial transactions, Al Capone routinely sought the counsel and input from both the Gambino and the Genovese crime families before ordering a "hit".  It's important, in business, to look at transactions from different angles and build a consensus.

So....What Happened Next?

As I mentioned earlier, it was a wild ride once investors started to decipher the Analyst-speak and take a look at the numbers.  As furious as the buying was when the market opened, the momentum reversed abruptly.  Of the 990 prior trading days since the IPO, Thursday, August 23rd, at almost 78 million shares, was the fifth highest volume day on record.

September 19th 2014, of course, was the date of the IPO.  Here are the bullet points describing briefly what transpired during the other four (4) highest volume days.

• November 30th 2015 - 98 Million shares - no news - (up 3.3%)
• June 8th 2017 - 81 Million shares - Volume was the result of an increased sales forecast press release. (up 13%)
• May 31st 2016 - After close of market that day Softbank announced a "fake" sale of BABA shares.  BABA dropped 6% the next day.  It's really surprising how much volume was traded just prior to an announcement like that!  I'll bet some Professional Investors were involved!
• January 29th 2015 - 77 Million shares - Disappointing Quarterly Earnings Announced before market open.  (down 9%)  Interestingly, volume was a robust 42 Million shares the day prior to the earnings release as well.  More Professional Investor involvement?  

Presumably, with US$ 14 Billion in shares traded in one day, last Thursday, people who knew what they were doing must have made a lot of money.  Again, those who didn't know what they were doing....didn't.

Of course the SEC has all sorts of tools to monitor "suspect" trading activity, but even the most sophisticated software would most likely fail to detect a coordinated, whack-a-mole, offshore effort, funded by at least US$3 Trillion of CCP money through thousands of various legal entities, protected by Caymans Banking/Privacy laws.  I'm guessing that "Hey I've got a hunch" wouldn't be probable cause for a Caymans/BVI Banker or CIMA Official to hand over records.  The SEC might have been able to track and figure out what Bud Fox was doing with Blue Star, but I doubt they would get very far with Alibaba. 

We also learned another thing, as I've opined in previous posts, since, when you are trading BABA stock and the Chinese Communist Party (CCP) has the other side of your trade, Thursday August 23rd has established and confirmed a benchmark.  We now understand that the CCP, through Cayman's and BVI Shell Corporations, will have no problem, going forward, supporting a share price on volumes of at least 80 million shares or US$14 Billion, on any particular trading day.  My guess would be, since this is a brilliantly diabolical CCP plan, that they have developed and maintain some sort of model that determines how many shares of BABA "they" own collectively throughout their Caribbean Professional Investor ecosystem.  They will keep supporting the share price as long as they (in aggregate) can continue to generate enthusiasm from US Investors through their PR effort.  They can "sell high" and "buy it back" at a lower price.  If there ever comes a point where US Investors aren't participating at acceptable levels, the CCP will most likely cash out.   

We can expect an increasing number of fantastic, incredible take-your-breath-away, not-to-be-believed-for-a-second press releases and statements from richly compensated interviewees extolling the virtues of Alibaba and the China dream, when, in reality, this is the greatest wealth grab and tool for capital flight/conversion in history.

To make a comparison, from a global financial perspective, this is the equivalent of and in some aspects, even worse than, the Cuban Missile Crisis.  Weapons of Mass Destruction are parked just a few miles off shore in the Caribbean, except (thank goodness) there are no missiles.  The Chinese Government chose to use Shell Corporations, and a pegged/fake RMB to accomplish their mission.  In one respect, it's actually worse than the Cuban Missile Crisis, as thus far, our government doesn't seem to understand or acknowledge the existence of the threat.
   

The "Open Letter"

Finally, I promised an open letter to all my Securities Lawyer Friends out there.  Of course, you all know, I'm not a lawyer and I don't play one on TV.  I've listed a few things that you might want to think about as you follow this saga through to its logical, inevitable conclusion  You all know how I enjoy bullet points by now..... so here you go:  

1.) You should be actively looking for lead plaintiffs for your class actions now.  The members of the class(es) will include all investors who were directly harmed by the collapse of Alibaba.  You might include interest holders of Altaba, Softbank, EFT's, Mutual Funds, Pensions, etc.  In short, just about everyone.

2.) You might consider working on your complaint/filing immediately.  You'll want to be the first to file in your respective jurisdictions.  The first pig to the trough always gets the best/most slop!  

3.) Your complaint will be a professional liability claim based on the willful ignorance of professional standards, lack of due diligence and "what a normal standard of care would require a professional adviser to know or should have known".  You should all know your particular statutes, procedures and jurisdictions and can decide when and how you want to file. 

4.) Surprisingly enough, the target(s) of your law suit(s) won't be Alibaba or Alibaba's management. You'd be wasting your time. If you went that direction you might win a judgement or two, but you won't get a big pay day. Alibaba and their/your money will be safely untouchable off-shore. The targets of your suits will actually be the above listed co-conspirator Banks promoting this mess and putting their quarterly stamps of approval on this disaster. (Merrill Lynch, Citigroup, Morgan Stanley, Credit Suisse, RBC Capital Market, Barclays, Macquarie, JPMorgan and of course PWC Hong Kong.)

5.) If you folks are capable of generating civil fines and settlements against Wells Fargo for some mortgage mis-rep ($2.09 Billion) and some bad insurance sales practices ($1 Billion) can you imagine what you might be able to do with material like this?  You would be front and center in a  "known or should have known" conspiracy which destroyed the Western Financial system.  That should be a YUGE! pay day for you.  Of course, US Taxpayers would end up, as always, footing the bill, but it would be well worth it to send a message that a "strong buy" recommendation, no matter what the Investor Call "signals", on every piece of dog-shit that somehow gets listed on an Exchange, will no longer be tolerated.    

Well, that's about it folks.....we'll see where this thing goes from here.  As I've said for a while now.  This is going to be an incredible ride..... Strap yourselves in, hang on and as always, practice safe investing.




Additional Reading

https://seekingalpha.com/article/4201652-alibaba-group-holding-ltd-baba-ceo-daniel-zhang-q1-2019-results-earnings-call-transcript?part=single

Alibaba Group Holding Ltd. (BABA) CEO Daniel Zhang on Q1 2019 Results - Earnings Call Transcript

Aug. 23, 2018 2:13 PM ET

|1 comment

| About: Alibaba Group Holding Limited (BABA)

Q1: 08-02-18 Earnings Summary

Slides

News

EPS of $1.22 beats by $0.01

Revenue of $12.23B (+ 67.8% Y/Y) beats by $430M

Alibaba Group Holding Ltd. (NYSE:BABA) Q1 2019 Earnings Call August 23, 2018 7:30 AM ET

Executives

Robert Lin - Head of Investor Relations

Joe Tsai - Executive Vice Chairman

Daniel Zhang - Chief Executive Officer

Maggie Wu - Chief Financial Officer

Analysts

Eddie Leung - Merrill Lynch

Alicia Yap - Citigroup

Grace Chen - Morgan Stanley

Thomas Chung - Credit Suisse

Mark Mahaney - RBC Capital Market

Gregory Zhao - Barclays

Wendy Huang - Macquarie

Alex Yao – JPMorgan

I'm told SeekingAlpha has a prohibition on posting full transcripts.  I've removed the full text which had been previously posted.   My bad....

The BABA 20-F....Financial Comedy Gold!!

Well, here we go folks.  They've done it again.  The Alibaba Accounting Department, after a couple of fits and starts and a month delay, at the 11th hour, finally managed to file yet another, laugh-out-loud, gut-buster of a 20-F Annual Report.  Needless to say, as always, they did not disappoint! 

Financial Comedy Genius!....Kudos!.....Bravo!  Like a George Lucas franchise, just when you thought it couldn't possibly get any better, they come up with the financial equivalent of "Jar Jar Binks". 

It's a page turner...it has to be....it's 233 pages with an additional 93 pages of circular footnotes, charts and tables, laden with nonsensical, legal sounding gibberish that would make a Securities Lawyer blush with envy and/or question his virility.  I've spent the last few evenings going through it (I have a day job...) and I have to say, I couldn't put it down.  It's riveting.

Sadly, in this issue, they've left out the family photos, advertising and screen shots of the fake/knock-off products they sell, presumably to save some space.  My guess is that some dull-as-a-butter-knife PWC accountant probably talked them out of including the personal, Horatio Alger scrap-book stuff.  It's a shame really.   

So let's start with the press release......it sets the tone:

The company aims to build the future infrastructure of commerce. It envisions that its customers will meet, work and live at Alibaba, and that it will be a company that lasts at least 102 years.

https://www.businesswire.com/news/home/20180727005591/en/

Yup....that's right....they are guaranteeing that the company will be around not 100 years, not 101 years.....but at least 102 Years!  Alibaba will be my (our) life....Alibaba is where we will live, work, meet and eventually be buried.....we'll raise our kids there and our pets will poop on our little slice of heaven that is the Alibaba front lawn.  Kind of creepy if you ask me.

As an aside...why aren't they issuing 102 year bonds to show their confidence in the business model?

As always, for your convenience, and because I value your time, feel free to read the RED Executive Summary at the beginning of each section.  If the topics don't pique your curiosity, you can move along to the next section and the next Executive Summary as the spirit moves you.


The Capital Structure...(Now you see it....now you don't...)  

Executive Summary: In this section we explore the following observations:

1.) There are now 920 separate operating entities in the Alibaba ecosystem.  500 in the PRC and 420 scattered all over the rest of the planet.  Alibaba has created 300 new "legal" entities a year for the last two years.

2.) They've "Enhanced" their Capital Structure.  The lawyers have been busy beavers.

3.) Major Business Segments and Operating Entities appear and disappear from the 20-F's.  There is no explanation in the footnotes.


So where do we start?  As you my readers know, I like to jump into really, really important, seemingly innocuous documents (Like Chinese 20-F's) which most people, without a ton of effort, generally can't begin to understand.  By virtue of this lack of understanding, they (understandably) don't seem to care too much about these documents until there's a painful enlightenment smacking them in the face somewhere down the road....followed by a chorus of "if only I'd understood this!" and the consequent, requisite Congressional hearings focusing on "blame delegation".  That's where I try to add value.  I try to help good folks like you, my cherished readers, see what's just over the horizon.  As always, I'm here to help.

So, speaking of "things we can't begin to understand without putting in a ton of effort" let's start out by talking about Alibaba's Capital Structure......I know, I know.....stop jumping up and down with glee....try to contain yourselves.  It's just accounting.....Geez....

So like we always do with an Alibaba 20-F review, with absolutely no rhyme nor reason, let's pick a random page.....let's start on page.....Oh....I don't know.....how about page 115?

It starts off with some some wonderfully amazing information:

As of March 31, 2018, we conducted our business operations across approximately 500 subsidiaries and consolidated entities incorporated in China and approximately 420 subsidiaries and consolidated entities incorporated in other jurisdictions. 

That's right, Alibaba now has 920 Separate Operating Entities!  Over the last two years Alibaba has created, out of thin air, or acquired, roughly 300 material Operating Companies per year.  That's roughly 600 new businesses, one new company every business day for two years.  The Alibaba lawyers have been working a ton of overtime.  They must be exhausted.  

Let's pause for a moment of silence.....in solemn gratitude.....for the lawyers.   

Moving along, Exhibit 8.1  (Ref: on Pg 231) lists "Significant Subsidiaries & Consolidated Entities". There are forty-six (46) businesses apparently deemed to be significant.  Sixteen (16) of these businesses are located in the  PRC (China), Twelve (12) in the Caymans, Nine (9) in the BVI, Six (6) in Hong Kong, Two (2) in Singapore and finally, One (1) in Luxembourg.  

https://www.sec.gov/Archives/edgar/data/1577552/000104746918005257/a2235254zex-8_1.htm
So, I guess, by definition, the remaining 874 businesses (920 - 46) are "insignificant"?  
  
When we drill down a little farther we see that there are really only fifteen (15) businesses that I'll call "Super Significant" (See the Chart on Pg. 115 below)  

And of these fifteen (15) "Super Significant" businesses, three (3) of them are brand spanking new in the last fiscal year!  And what's really weird, is that Zhejiang Cainiao Supply Chain Co., Ltd., Youku Internet Technology and  Youku Information Technology aren't even on the list of  "Significant Subsidiaries & Consolidated Entities". (Exhibit 8.1)  Is it a typo?  So maybe they are not Significant?  Just "Super Significant".  Puzzling to say the least.... 

Zhejiang Cainiao Supply Chain Co., Ltd. is only mentioned once in the report, on page 91 under "Regulation of Foreign Investment"

The only time Youku Internet Technology is mentioned in the report is on pg 119 as a party to a contract that "Gives us Control over VIE's".  Youku Information Technology is not mentioned at all....here's the ridiculous language re: Youku Internet Technology....

The parties to the loan agreement for each of our material variable interest entities are Jack Ma and Simon Xie or other shareholders of those entities (in respect of the existing VIE structure) or, following the VIE Structure Enhancement, the relevant PRC investment holding company, on the one hand, and Taobao (China) Software Co., Ltd., Zhejiang Tmall Technology Co., Ltd., Alibaba (China) Technology Co., Ltd., Zhejiang Alibaba Cloud Computing Ltd. and Youku Internet Technology (Beijing) Co., Ltd., the respective wholly-foreign owned enterprise, on the other hand.

Forget for a moment that there are now oodles of undisclosed/un-described loan agreements all over the planet with insiders, which is frightening enough, now, on one hand (or the other) we have three new "Significant" businesses, we know nothing about, that have somehow just shown up in the filings this year, that are somehow being "Enhanced".

Let's dig a little further.

When we look at last years (20-F YE 3/31/17 pg. 111) chart we see that Alibaba.com Limited (Caymans) and Alibaba.com Investment Holding Limited (BVI) are both missing from this year's chart, yet they are still included on Exhibit 8.1.  A text search of the pdf shows that, oddly enough, the only other time they are mentioned in the filing is in the biography of Walter Kwauk.  So where did these "Significant" businesses go?  Are they still relevant?    

Walter Teh Ming KWAUK (  ) has been our director since September 2014. He previously served as an independent non-executive director and chairman of the audit committee of Alibaba.com Limited, one of our subsidiaries......

Since Mr. Kwauk is on the Alibaba Board, and is, in fact, the head of the Alibaba (BABA) audit committee and amazingly "satisfies the criteria of an audit committee financial expert as set forth under the applicable rules of the SEC" (Pg. 184) perhaps, with all of this expertise, he can tell us why the hell these two businesses were removed from the Alibaba Org chart? ....or maybe help us figure out what the three brand-spanking-new businesses that just showed up actually are?

VIE Structure "Enhancement"

Everyone pretty much understands the structure of the Alibaba ecosystem.  In broad brush, general terms, it's a group of 36 "partners" listed on page 176 of the filing, who are charged with the responsibility of scouring the world for cash.  

Through a convoluted web of dubious financial entities (now 920 in number), designed to meet the legal requirements of Chinese "ownership" and un-auditability, the partners, after careful deliberation, vote to piss away the money raised on kickbacks and political payoffs, in exactly the direction Jack and the CCP tell them to piss it, adjusting for wind, as needed.  

Now, you'd think that this would be a pretty easy (and fun) set of marching orders to follow, but over time, we all know how confusing, off-track and complex financial shenanigans can get.  Fortunately, last year, Alibaba's lawyers finally grabbed the bull by the horns and undertook a massive effort to simplify Alibaba's capital structure.  So let's see what they did, keeping in mind that there are 920 entities in the BABA ecosystem now, with 420 "offshore", mostly located (presumably) in Hong Kong, the Caymans and BVI. 

On pg. 116 of the filing, management describes the "VIE Structure Enhancement".  This is the summary (in actual English "words") of what they were doing....followed by a "simple" diagram.


Upon the completion of the VIE Structure Enhancement for each VIE, the equity interest of each such variable interest entity will, instead of being held by a few individuals, be directly held by a PRC limited liability company, which in turn will be indirectly held (through a layer of PRC limited partnerships) by selected members of the Alibaba Partnership or our management who are PRC citizens. This new structure institutionalizes the governance framework of our VIEs.

Isn't that Awesome (and really smart sounding)!  The diagram below describes how the legal structure of the Variable Interest Entities looked BEFORE the "Enhancements" got underway.

Pretty simple huh?

1.) BABA owns WFOE's through offshore shells (Cayamans/BVI/HK)

2.) The WFOE's secure contracts, "call options" and various agreements with both the VIE's and the VIE shareholders in exchange for loans/cash.

After the "Enhancement" here's what we have.....on pg. 118....much simpler...

After the "Enhancement"....

1.) BABA owns WFOE's through offshore shells (Cayamans/BVI/HK).
2.) The WFOE's enter into contracts and agreements with the VIE's.
3.) Each VIE is owned by a PRC Investment Holding Company.
4.) The PRC Investment Holding Company is owned by various Limited Partnerships.
5.) The Limited Partnerships are owned by Individual Limited Partners and various PRC LLCs as General Partners.
6.) The General Partner LLC is owned by individual shareholders and/or PIE's (Political Insider Elite's).
7.) The WFOE's negotiate contracts and agreements in exchange for loans/cash with ALL of the above entity types.
8.) Again, there are now 920 entities involved in the Alibaba ecosystem and I'd suspect that the number will be growing geometrically.

The consolidation of all of these entities, VIE's and WFOE's - "Wholly-Foreign Owned Enterprises" is described in F-18 (Footnote 2(c)) Feel free read through the painful details of this footnote if you have the stomach.  The only thing that pops out is that these entities, combined are a relatively small piece of the pie.   Total Liabilities are RMB 61.699 Billion compared to Total Assets of RMB 54.463 Billion (i.e. insolvent by RMB 7.236 Billion)  Compared to BABA's Total Balance sheet of RMB 717 Billion.

I, for one, am so glad that Alibaba management has finally acknowledged, through this new Capital Structure "Enhancement", their obligation to be forthright and transparent in their filings.  Baby steps....

So Who Actually Owns the Ordinary/ADS Shares?

Executive Summary:

1.) ADS Shares at US Financial Institutions have ballooned from 196 million four years ago to 1.669 Billion now.  Per the 20-F these shares are concentrated in 128 US Financial Institutions held in "street name".

2.) A significant number of the shares in US Institutions are held by Chinese insiders through Offshore Shell Companies.  450 Million shares are held by the largest 20 Institutions.

3.) The Chinese Communist Party (CCP) is manipulating the bid/ask through myriad offshore entities on a relatively small population of "arms length" trades in order to create the illusion of a market made at a price that defies financial gravity.  The risk of collapse grows larger by the day.

The statement on page 188 of the 20-F is illuminating:

As of July 18, 2018, 2,592,184,258 of our ordinary shares were outstanding. To our knowledge, 1,669,625,497 ordinary shares, representing approximately 64% of our total outstanding shares, were held by 128 record shareholders with registered addresses in the United States, including brokers and banks that hold securities in street name on behalf of their customers. We are not aware of any arrangement that may at a subsequent date, result in a change of control of our company.

Authors Note: Why in the world did they pick Wednesday July 18th 2018 as the date to disclose the ordinary shares outstanding?  My guess would be that they wanted a date that was not comparable to any public filing date so these numbers would be impossible to validate/verify.  A Wednesday in the middle of July sounded like a good day to "make shit up".

The 20-F, in the table on pg. 187, with a little bit of "Enhancement" math, shows us the distribution of these shares (One (1) Ordinary Share equals one (1) ADS (American Depository Share)):

When we look at the table above we see that there's an "Overlap".  Roughly 455 million shares must be in two places.  Presumably, some of Altaba's (Yahoo!) shares, plus a hundred million (or so) shares held by, for example, offshore (Caymans/BVI) shells, in "street name" at the 128 identified US Financial Firms/Brokerages/Banks, are in both places.  (Remember how Softbank "sold" some BABA shares to West Raptor Holdings? Yet they are still beneficially owned?)  I guess that the "Overlap" might make at least some sense in an odd sort of way.

So now, let's compare that to where we were back in 2014, Post IPO (pg. 250 thru 254 of the 424(b)4 filing)

The statement on page 254 of the filing is illuminating:

As of August 31, 2014, 196,373,235 of our outstanding ordinary shares were held by shareholders of record in the United States, principally Yahoo. We are not aware of any arrangement that may at a subsequent date, result in a change of control of our company.  

So let's restate the 2014 - POST IPO figures to compare to the schedule above.  The chart below describes how the ownership of BABA would look right after the IPO:

Now let's focus on the "Other Ordinary Shareholders" above.  US "Shareholders of Record" have increased from 196 Million shares (8% of Outstanding Shares) immediately after the IPO to 1,669 Million shares (64%) today.  Put another way, immediately after the IPO, 30% (745 Million) BABA shares were held outside the US (presumably) by Non-US shareholders in China.  It would seem that Jack, Joe, Softbank, Altaba, Officers, Directors and insiders as a group (through offshore shells in "street name") have moved the lions-share of the custodial relationship(s) to US Financial Institutions, where, just thinking out loud, they can pledge these shares as collateral and do all sorts of wonderful "leveragey" things with them.  The faith that they've shown in the US Financial System is gratifying and extraordinary. 

Now let's go back to page 250 of the 2014 IPO Document (424(b)4 Filing).  At the time, we can see below that there were roughly 190 Million shares held by Caymans/BVI Shell Corps.


The following Shell Corps. were listed in the notes as shareholders:





































Interestingly, when we do PDF searches of the recent 20-F, the sixty-one (61) entities listed above and apparently integral to the pre-IPO financing structure, we see that these entities are either nonexistent or listed in the periphery today, like, for example, the benign discussion of Jack's  "Relationship With Investment Funds" (Pg. 204) 

My guess would be that these businesses and their relationships with Alibaba are far from over.  These Shells, and probably many more like them, most likely continue to spearhead the proliferation and ADS price management of the Ordinary Shares into the US Financial System.  I've described this phenomenon as "Boomerang Money" in prior posts. 

Next, let's take a look at the most current 13-F Summary information available on Yahoo! Finance, apply a few ratios, and compare it to the Alibaba 20-F disclosures.



































A few things jump off the page at us:

• First, we see that Yahoo! Finance shows that there are 1,926 US Institutions holding Alibaba Shares as of 12/31/17, rather than the 128 Institutions listed in the 20-F as of 7/18/18.  Quite a disparity.
• Yahoo Finance shows 1.051 Billion Shares held by Institutions (rather than 1.669 Billion per the 20-F).  Again, quite a difference 
• Float, or unrestricted shares available to trade was 1.214 Billion shares, or 46.85% of outstanding shares per Yahoo! Finance.  So apparently "Float", at that time was significantly less that the 1.669 Billion shares held by US Institutions today?  Are some of these shares still restricted?  Unless I'm misinformed, I thought the "Lockups" had long passed.
• Roughly 40% of float, as of 12/31/17 was concentrated in twenty (20) US institutions.

This is so worrisome I'm going to type it again:  "1,669,625,497 ordinary shares, representing approximately 64% of our total outstanding shares, were held by 128 record shareholders with registered addresses in the United States"....or roughly US$300 Billion is now sitting in US Banks and Brokerages ready, willing and able to be pledged as "rock solid" collateral for (presumably) Caymans/BVI Shells.

Moreover, do any of you readers remember "Re-Hypothecation"?  The practice where banks and brokerages use their customer/client collateral as their own?  Let's lever up and hit the gas?  Oh sure you remember this.....it's what caused the liquidity crisis that threw Lehman Brothers into bankruptcy.....is it coming back to you now?  Could anything like this be happening here?....food for thought.

So who's right?  The BABA 20-F Filing (1.6 Billion shares in 128 US Institutions) or Yahoo! Finance's analysis of the 13-F Filings? (1.1 Billion shares held at 1,926 Institutions).  

There's a good chance that both might be correct.  It could be that there was a massive increase in shares held by US Institutions in the last 6 months.  It could be that the insider owned Shells have been going absolutely bonkers....moving more than 600 million shares into US Institutions and consolidating them down from 1,926 banks/brokerages to just 128 in the same time frame.  You'd think that BABA management should be very accurate (down to the share) in their filings.  You'd also think that Yahoo! Finance is also generally pretty accurate at tabulating 13-F data.  They don't usually make mistakes either.        

So here's my thesis re: Alibaba's  Capital Structure:

Is it possible that, like the RMB, the CCP has opened the same playbook, manipulating the bid/ask through myriad offshore entities on a small population of trades in order to create the illusion of a market made at a price that defies financial gravity?  A team of Chinese Communist Party (CCP) Members in the Caymans is relentlessly trading, coordinated with other teams of CCP Members in the BVI, all pitted against a smattering of tidal-chart-watching, butterfly-correlation-coefficient following, nearly retired, fund managers, day traders and self-proclaimed "Seeking Alpha" financial wizards, as the US custodial "street name" share count increases geometrically?  Boatloads of these shares continue to find their way onto the books of US Institutions.  At some point the 20-F might actually (accidentally) proclaim that there are indeed more shares on deposit in US Financial Institutions than are actually issued/outstanding, in yet another BABA-esqe feat of financial prestidigitation to look forward to!

All that said, the big hypothetical question is, what happens when the CCP decides to hit the "sell" button? 

Employees and their Office Space!

Executive Summary:

1.) In the last year Alibaba has added roughly "Fifteen Pentagons" in office space with only 16,000 additional FTE's, or roughly 3,400  new square feet per new employee.  Real Estate is expensive, yet, overhead stayed about the same.  Weird.....
 
2017 20-F Pg 115

As of March 31, 2017, we occupied facilities around the world with an aggregate gross floor area of office buildings owned by us totaling 558,080 square meters. (6,007,173 square feet)

2018 20-F Pg 121

As of March 31, 2018, we occupied facilities around the world with an aggregate gross floor area of office buildings owned by us totaling approximately 5.7 million square meters. (61,354,800 square feet.)

(Authors Note: Whooooaaaa!!! 61 million square feet of OFFICE BUILDINGS OWNED by Alibaba!!!???)

2018 20-F Pg 121

As of March 31, 2016, 2017 and 2018, we had a total of 36,446, 50,097 and 66,421 full-time employees, respectively.

As a point of reference, the US Pentagon, I'm told, is the world's largest office building, with about 6,500,000 sq ft (600,000 m2), of which 3,700,000 sq ft (340,000 m2) are used as offices.  The Pentagon houses roughly 26,000 Office Employees.

So in just one (1) year Alibaba has increased their office space the equivalent of fifteen (15) Pentagons?  That's amazing!  So I guess real estate expense & overhead should be going up a bit??.....

I also understand that they just redid the bathrooms and put in new Berber carpet at their World-Wide Global Headquarters in the Caymans (Alibaba Group Holding Limited, Trident Trust Co (Cayman) Ltd, One Capital Place 4th Floor, Georgetown, Cayman).  Gorgeous!  Ain't she a beauty?  Money is apparently no object.

Taking the analysis a step further, since the US Government has been long renowned as the world's foremost efficiency expert, using the appropriate Pentagon ratios, we can calculate that 61,354,800 square feet of office space (the world's biggest cube farm) would accommodate 430,711 employees, each of whom would be allotted 142 square feet of gross office space.

When we compare this to Alibaba's space usage we see that even though they've added "15 Pentagons" of Office Space, they've only added 16,324 FTE's.  This would give each new employee roughly 3,390 sq. ft. of new lounging area .  Spacious indeed!  No wonder everyone wants to work at Alibaba.!

Moreover, when we look at the book value of the newly acquired "15 Pentagons" we see that the new space doesn't seem to be nearly as luxurious as the currently owned space.  When we compare the Balance Sheet values of Property & Equipment (net of depreciation) for 2018 and 2017 (F-5 of the respective 20-F's) we see that the Book Value per square foot, including the newly added 55 million square feet of space drops from $488.75 per square foot down to $172.77.  Since the bulk of the 2018 $10.6 Billion is newly acquired space with presumably very little depreciation, it looks like Alibaba, as always got an incredible deal!

Since these numbers are so cattywampus a schedule showing the addresses of major buildings, their square footage and cost basis would have been appreciated.  

GMVVVVVVVVV!

Executive Summary:

1.) Alibaba has a retail presence roughly 1.5 x Walmart now.  GMV is US$ 768 Billion vs. Walmarts piddling US$ 500 Billion.

2.) BABA has developed a huge new revenue stream, winding down the huge, and rapidly growing supply of China's Non-Performing Loans (NPLS), yet, this business segment wasn't mentioned in the 20-F at all.

3.) Based on the value of "real" retail GMV the Market Cap of Alibaba should be about the same as Target (NYSE:TGT) (US$ 40 Billion) rather than US$ 470 Billion, the company's current Market Cap.  

Gross Merchandise Volume (GMV) has long been a favorite topic of discussion for Alibaba watchers, even though it seems to have evolved into a much less important management metric over the last few years. It's only disclosed annually (and once on "Singles Day") now.  (For Example: In the IPO filing "GMV" was mentioned 223 times, while in this years 20-F it was mentioned just 29 times, most of the references were related to the table on page 7 described below).  

The supposition by most of us is that Alibaba can't possibly be selling anywhere near the amount of socks, underwear, winter coats, TV's and phones, etc. that they purport to sell.  They've never disclosed anything close to a "product mix" analysis for their GMV.  Of course there have been all sorts of anecdotes and funny stories about how Alibaba sells boatloads of Yachts, Bad-Assets, Auctioned NPL's, Skyscrapers, Estonian Real Estate and Jumbo Jets.

We are told often by Alibaba management that they continue to be ever vigilant and on the lookout for knock-offs and fakes, even though a third grader with an iPhone can come up with pages of questionable SKU's instantly by typing "Gucci" or "Prada" in a T-Mall or Taobao search box.  Jack, for all of his effort, assurances and representations, apparently doesn't have his best men/women on it....

There's also some excellent research, sent to me by one of my readers, done by the Paulsen Institute and Marco Polo, which makes a solid attempt to quantify at least some of this silliness.  Apparently, winding down the ever growing basket of China's non-performing loans (NPL's) has become a significant part of the Alibaba business model.  Here are a few bullet points from the July 25th, 2018 article:

• Alibaba, through its Taobao platform, has assumed a uniquely broad role in helping China’s financial sector extract value from bad loans.
• Taobao has the potential to become the single most important platform for NPL auctions. In 4Q 2017 NPLs with a face value of 33 billion yuan (US$ 5.3 Billion) were auctioned on Taobao.
• Meanwhile, Taobao has become the judicial system’s platform of choice, with some 3,500 courts throughout China currently using it for judicial auctions.

For some reason, this new, high-growth aspect of Alibaba's business model (US$20+ Billion on an annualized run rate) wasn't mentioned anywhere in the 20-F or during the Investor Call.  Strange....

All that said, according to their numbers, Alibaba now controls more GMV in their ecosystem than Walmart's global merchandise sales.  Here are the numbers.

Alibaba's GMV is now US$768 Billion (RMB 4,820B/6.276) (2018 20-F Pg. 7) Compared to Walmart's meager $500 Billion in Revenue.  Again, in just a few short years Alibaba has grown its GMV retail presence to 150%+ of Walmart's global revenue.  BABA GMV is up nearly 3x from the $296 Billion it reported at the time of the IPO.  

Of course, there are all sorts of estimates and guesses out there that "real" retail GMV is probably about a third, or half of what they've reported, but that doesn't seem to bother investors.  US Investors are willing to shell out hard earned dollars to get in on the ground floor of this China eCommerce dream.  When I mention the GMV issues, BABA boosters will often come back with "yeah....the books are probably cooked....but it doesn't matter, the business model is solid.....that's just the way it is in China!" 

Here's the "simple math" as to why it does indeed matter.  Let's say that Alibaba's GMV is actually 1/3rd of what it's reporting (humor me here) and that the rest of the GMV actually is overstatements, returns, puffing, bad assets, kickbacks, balance transfers, NPL's and low margin/value transactions not necessarily associated with retail/eCommerce.  So BABA's "Retail Presence" drops from US$768 Billion down to US$ 256 billion.  BABA is, of course, valued as an ECommerce Retailer based on their market presence.  You'd think that Business (A) with a third of the market presence of a similar Business (B) would be worth much less.

Further, let's look at the RMB/USD Exchange Rate (See how this is all related??)  From my prior posts we can conclude with a SWAG that the Exchange Rate is also overstated by a factor of three (3), which would further reduce the US$ value of Alibaba's "Retail Presence" from US$256 Billion down to US$85 Billion.  As a point of reference, Target's Revenue is $72 Billion with a Market Cap of US$ 40 Billion.  Alibaba's current Market Cap is just shy of US$470 Billion.

I'm feeling a bit of a valuation disconnect here.        

   

"Investees" (More Preseidigitation!)

Executive Summary

1.) We examine Footnote 4 of the 20-F where we see that Book Values (Cost Basis plus write-ups) of Investees have increased roughly US$22.3 Billion in the current year.

2.) A number of former "Flagship" businesses (Auto Navi, UC Web, OneTouch, Singapore Post, Weibo, Meizu) are all missing in action.  They've disappeared without a trace or mention in the 20-F.

3.) Consolidating money-losing-dog-shit businesses using all sorts of valuation shenanigans to hide what's happening, and/or bailing out friends with US Shareholder Money seems to have consumed much of management's time and resources.

4.) We examine the footnotes for  Alibaba Pictures, Cainiao, Wanda, OFO, Alibaba Health and Wasu.  These are AWESOME!!

When we examine Footnote 4 (one of my favorite footnotes) this year a few things jump out at us.  But before we get into the nitty-gritty I'd like to take a moment to congratulate the Alibaba Accounting Department on their continuing effort (similar to their effort to root out fake, knock-off merchandise and Capital Structure "Enhancement") in moving toward complete transparency on their disclosures.  I particularly like:

• That Footnote 4 (Pg. F-36) must be read in conjunction with Footnote 11 (Pg. F-71) and Footnote 13 (Pg. F -76), giving the reader practice in both turning pages and maintaining concentration as he/she tries to figure out what's going on.
• Even though the 20-F is published for US Shareholders, in English, for shares traded on the NYSE, the report presents values, randomly switching between RMB, HK$ and US$, giving the reader the chance to familiarize himself with global exchange rates at various points in time.
• Unlike last year, they've chosen not to report both carrying value of the acquired businesses or "life to date" gains booked associated with the step-acquisitions of individual businesses.  Rather than bury them in confusing footnotes they've chosen to omit them all together so the reader doesn't get overwhelmed.
• We had to "back into" the valuation for "Other" (RMB 6,406 Million = US$1.020 Billion)) since management decided to show the change in balances rather than the original Cost/Investment.  (RMB 5,292 Million + RMB 834 Million) 
• They've added a teeny-tiny paragraph following 2(ag) showing the US$6 Billion of transactions that they've committed to, but haven't quite closed (Focus Media, DSM, ZTO, etc.) over the couple of months since year end.  It looks like the spending spree is accelerating.     

The table below illustrates where we were last year, published in my "Finding Inner Peace in Dharamsala .....and thoughts on the Alibaba 20-F...." post.





















































So as of the 2017 year-end 20-F Alibaba had "invested" US$ 33.903 Billion in these businesses and booked US$ 7.299 Billion in valuation gains "Life to date".  Good.  Got it.   Now, fast forward to this year's 20-F.

Interestingly, in this year's 20-F the only place the aggregate "Gain on Deemed Disposals of Assets" of US$ 4.137 Billion is mentioned is on page 4 in the "Reconciliation of Net Income to Non-GAAP Income".  If it were me, I would have put together a schedule prominently describing the composition of this gigantic figure and what businesses/disposals it relates to, especially since it represents roughly a third of Non-GAAP Income.  But that's just me.

The table below compares the 2018 "Note 4" to the 2017 "Note 4" Investment/Purchase values.  Again, note that the "valuation gains" assignable to each Investee are no longer disclosed.

Based on the footnotes, Investments and Commitments (soon to close) in these businesses increased by US$ 22.3 Billion last year.

Interestingly, we also have a number of new "Investees" that showed up on the Alibaba books this year:

Wanda, Easy Home, OFO, Sun Art, Yiguo, China Unicom, Sauche, Best Inc, Tokopedia,
Onshore/Offshore, Focus Media, DSM Group, ZTO, Huitonga, Shiji Retail and Kaiuan.  "New" Investments totaled RMB 86.831 Billion (US$13.835 Billion). 

We also note that a number of Alibaba's flagship investments are missing from Footnote 4:

Auto Navi, Alibaba Pictures, UC Web, OneTouch, Singapore Post, Weibo, InTime, Cainaio, Meizu totaling RMB 45.538 Billion (US$ 7.256 Billion) are missing in action.

PDF searches of the 20-F document reveal that:

• Auto Navi is discussed 10 times in the boilerplate "for example" language unchanged from the prior year, but there is no discussion of the business. It's a shame, from reading the IPO docs you would have thought this business was one of Alibaba's crowned jewels.
• Alibaba Pictures was removed from Footnote 4 and discussed separately.
• UC Web is no longer referred to as "UC Web".  It shows up in the 20-F as "UC Browser".  The only current (non-boilerplate) reference in the filing appears on page 81: "UC Browser is one of the top three mobile browsers in the world and the number two mobile browser in India and Indonesia by page view market share in March 2018, according to StatCounter (http://gs.statcounter.com)"
• OneTouch was mentioned once on page 162 under "Allowance for Doubtful Accounts Relating to VAT Receivables".  The note was the same as last year, management probably just forgot to remove it from that paragraph.  In any case OneTouch has disappeared without a trace.
• The Singapore Post is also gone.  We don't know what happened to this great business, at least from the filings.  
• Any mention of the RMB 7,310 Million (US$ 1,165 Million) valuation for Weibo is missing in action as well.
• InTime was consolidated following the acquisition of the majority of outstanding shares. (Note: 4(c))
• Cainaio was consolidated (Note: 4(b))
• Meizu's RMB 3,619 Million (US$ 567 Million) valuation has disappeared as well.  Perhaps a half-billion-plus dollars is no longer a material amount to Alibaba?

Featured Notes worth discussing:

Alibaba Pictures - Page. 162 

After years of delay they've finally written down (and consolidated) Alibaba Pictures, taking an impairment charge of RMB18.116 Billion (US$2.888 Billion).  They were also careful to mention on page 162:

Nonetheless, the market value of our investment in Alibaba Pictures as of March 31, 2018 remains well above our original investment amount that we paid in June 2014.  

This Alibaba Pictures write down was coincidentally offset by a consolidation gain for the write up of Cainiao, here's the note buried on page 129.

In October 2017, as a further step to implement our New Retail strategy, we completed a subscription for newly issued ordinary shares of Cainiao Network for a cash consideration of US$803 million. Following the completion of the transaction, our equity interest in Cainiao Network increased from an approximately 47% to an approximately 51% and Cainiao Network became our consolidated subsidiary. We expect that Cainiao Network will help enhance the overall logistics experience for consumers and merchants across our ecosystem, and enable greater efficiencies and lower costs in the logistics sector in China.

The amount of the gain is buried on page 145.

The increase was primarily due to a non-cash gain of RMB22,442 million (US$3,578 million) arising from the revaluation of our previously held equity interest in Cainiao Network when we acquired control over Cainiao Network in mid-October 2017.

It is indeed fortuitous that wonderful write-up opportunities like Cainiao pop up just when a businesses like Alibaba Pictures begin to falter. Alibaba management is truly blessed. 


The obvious question I have is, the total gain booked is US$4.137 Billion (Pg. 4) and that includes the Cainiao gain of US$3.578 Billion that would indicate that there's another US$559 Million in write ups that are not described anywhere else.  In a mainland investment environment where equities are down substantially in the last six months, could it be that these write ups might be illusory and there are more write-downs/offs on the horizon?

Wanda - Note 4(k) F-52


Wanda Film, a company that is listed on the Shenzhen Stock Exchange, is principally engaged in the investment and management of cinemas and film distribution businesses. In March 2018, the Company completed an investment in existing ordinary shares of Wanda Film for a cash consideration of RMB4,676 million, representing an approximately 8% equity interest in Wanda Film. Such investment is accounted for under the cost method (Note 13) given that a readily determinable fair value is not available due to the suspension of trading of its shares for an extended period as of March 31, 2018.


This was a really shrewd move, showing the brilliance of Alibaba management, as well as their benevolence, helping Xi's buddy, Wang Jianglin out of a real jam since trading had been suspended for nearly a year (since July 4th, 2017)  at the time of the Alibaba "investment" .  Alibaba was able to swoop in and pick up this stock at a bargain price while it was suspended/pending-de-listed.  Also, thanks to the generous nature and unwavering faith of US Shareholders, Alibaba management knew full well that there would be no repercussions from failing to book the US$750 Million write off/down and burying this transaction in a one paragraph disclosure deep in the bowels of the footnotes of the 20-F.  As we all know, in China, suspension of trading, or even better, a de-listing is a vote of confidence for management and validates a businesses intrinsic value.  It's a confirmation that management has everything under control.  (For you Chinese readers out there, that was what we Westerners refer to as "sarcasm".)    

OFO Bike Sharing (F-52)

(m) Investment in OFO International Limited ("OFO")

OFO is one of the leading bike-sharing companies in the PRC. During the year ended March 31, 2018, the Company completed an investment in existing and newly issued preferred shares of OFO for a total cash consideration of US$343 million (RMB2,272 million). As of March 31, 2018, the Company's equity interest in OFO was approximately 12% on a fully diluted basis. Ant Financial is also an existing minority shareholder of OFO. Such investment is accounted for under the cost method (Note 13).

https://www.forbes.com/sites/bizcarson/2018/07/18/ofo-bikes-us/#78fed8872785

This picture pretty much says it all.....I'm sure everything is just fine and dandy at OFO. 

Alibaba Health (F-52 (4(i))

I discussed the recent history of Alibaba Health and Yunfeng (Jack's Piggy Bank) in my analysis of last year's 20-F.  Feel free to refresh your memory by rereading the section entitled Alibaba Health ....More of the same.

We see a familiar game plan.  Create a fake valuation based on a small piece of the pie and value the entire enterprise based on that piece, as you make "step" acquisitions and book valuation "gains".

In May 2018, the Company agreed to transfer its business relating to certain medical devices, healthcare and adult products and the medical and healthcare services on Tmall to Alibaba Health for an aggregate consideration of HK$10.6 billion, which will be settled through the issuance of approximately 1.8 billion newly issued ordinary shares of Alibaba Health. The completion of this transaction is subject to a number of conditions including the approval by the shareholders of Alibaba Health and certain regulatory authorities. Upon the closing of this transaction, the Company's effective equity ownership of Alibaba Health will increase to approximately 56%.

Since the value of Alibaba Health (HK:241) nearly doubled after the announcement, a statement like this absolutely screams  for the deployment of the Banker Speak Translator (BST).  Here's what the note really says:

BST:  This is AWESOME! we took a bunch of floundering product categories out of TMall that nobody knows the value of, said they were worth HK$ 10.6 Billion and had a company we control (Alibaba Health) issue shares in that amount, increasing the Shareholder Equity in the company without spending a dime of cash! (Shit!....we should have made it HK$20.0 Billion!) And now that we have a 56% ownership interest we can probably just consolidate it and get it off that that pesky Hong Kong stock exchange where uninformed shareholders can "vote" on the value of the business every day and muck up the works.

Maybe I'm over simplifying, but it looks like the only thing that the shareholders of Alibaba Health got for their HK$ 10.6 Billion of dilution is a link on the Alihealth.cn home page redirecting to the Tmall Health page where they can buy all sorts of cheap, questionable medications.  Try it....it's kind of funny/lame.

http://www.alihealth.cn/

So here's what Alibaba Health looks like today.  Note that the stock nearly doubled since the May announcement that Alibaba was "trading" the TMall health care business for HK$ 10.6 Billion of dilution:  

   
My guess is that they will be consolidating this mess at some point (another valuation gain is on the horizon) and they won't have to discuss the gory details again in next year's 20-F.  With the issuance of the HK$ 10.6 Billion new shares, they will have (by my calculations from these footnotes) spent RMB 65.429 Billion (Including the RMB 18.603 valuation gains booked in prior years) to acquire 56% of Alibaba Health.  The Market Cap of Alibaba health today is RMB 79.0 Billion (Even after the recent run up....Note that the Market Cap was RMB 40 Billion just prior to the May, 2018 announcement.).  A 56% interest in Alibaba Health should be worth about RMB 44.24 Billion now.  

I'll be the first to admit that I had a really hard time going through the footnotes and currency conversions in order to do these calculations and I'd appreciate any guidance or help from anyone familiar with this transaction.  As an aside, it would have been nice if they just would have disclosed that:

 "Our Cost Basis (What we Paid for the business + "write ups") is US$ XXX Billion"
 "The current market value (3/31/18) of the 56% of the business we own is US$ YYY Billion"
 "We carry the investment at cost so we have an unrealized gain/loss of US$ ZZZ Billion"

Wouldn't that be better than burying all of these step transactions, recapitalizations and valuation changes in the footnotes for the poor, uninformed reader to stumble through and try to decipher?

So after all of the smoke clears, it looks like they've got yet another unrecorded/unrealized loss of RMB 21.189 Billion (US$ 3.854 Billion) at the current market value of Alibaba Health (HK:241), that will have to hit earnings at some point in time.

All of these unrecognized "US$ Billions" of losses are going to start adding up...

Wasu Media (F-58 Note 4(ag))

We covered the incestuous relationship between Wazu Media, Jack and Simon Xie in last year's Finding Inner Peace in Dharamasal  20-F  post.  I'd encourage you to re-read it.....it's pretty entertaining even if I do say so myself.  

In a nutshell, Simon got Jack to spend US$ 1 Billion of US Shareholder's money on "Wealth Management Products" to use as collateral so that an unnamed Chinese banker would make Simon a loan to buy a minority interest in "Wasu Media". 

There's no change described in the structure of this absurd deal in this year's 20-F.  Simon still owes the US$1 Billion to the unnamed Chinese banker and he's still paying the interest on the loan using the money from his other loan directly from Alibaba.   The money drawn on this RMB 2 Billion Line of Credit given to Simon Xie (to pay the interest on the Billion US dollar loan keep this thing afloat) has increased by another RMB 400 Million to RMB 1.137 Billion.  So it continues to bleed.

So Alibaba is on the hook for both the principal and interest.  Tell me again, one more time, why we need Simon Xie involved?

Here's a summary of how Wasu Media has done since the Spring of 2015 when Simon got his hands on the reins of this juggernaut.  Looks like the stock tanked from 60 to 8....Ouch!  I'll bet that "unnamed Chinese banker" isn't too happy.     

Jay Clayton's SEC

Executive Summary:

The SEC, our best and brightest financial regulator is absolutely, completely OK with everything I've described above.  Steady as she goes.....don't want to rock the boat.  Jay should be really proud of his trained puppy dogs.  "Roll over!...Play dead!....that's such a good boy!"   

This year: 2018 20-F Pg 61
ITEM 4A. UNRESOLVED STAFF COMMENTS - Not Applicable.

Last yeas: 2017 20-F Pg 115
ITEM 4A. UNRESOLVED STAFF COMMENTS - Not Applicable.


2018 20-F Pg 209
Pending SEC Inquiry

In early 2016, the SEC informed us that it had initiated an investigation into whether there have been any violations of the federal securities laws. The SEC has requested that we voluntarily provide it with documents and information relating to, among other things: our consolidation policies and practices (including our prior practice of accounting for Cainiao Network as an equity method investee), our policies and practices applicable to related party transactions in general, and our reporting of operating data from Singles Day. We are voluntarily disclosing this SEC request for information and cooperating with the SEC and, through our legal counsel, have been providing the SEC with requested documents and information. The SEC advised us that the initiation of a request for information should not be construed as an indication by the SEC or its staff that any violation of the federal securities laws has occurred.

The only text omitted from the prior year 20-F (Pg 31) was:

This matter is ongoing, and, as with any regulatory proceeding, we cannot predict when it will be concluded.

Of course, as we'd expect, Alibaba Management's omission of this text is intended to be relatively subtle/liberal/favorable. By the omission of this statement, I guess we can infer that the investigation is winding down and they can indeed predict that it will be concluded. Apparently, the only reason the SEC opened the investigation in the first place is that Jay is overstaffed and he's just trying to find busy work SEC newbies.   Gotta promote that "Capital Formation" at all cost!  The way this reads, the request for information should be viewed as a "vote of confidence" or a learning experience for the SEC staffers. Thank God the SEC is all over this, securing the financial future for US Investors.

I'd guess that the entire note will be omitted, without discussion, in the 2019 20-F.  Jay and the gang will have closed the investigation without fanfare by then.

Ant Financial 

Executive Summary:

Even though Alibaba and Ant Financial are joined at the hip, US Investors continue to see only half of the story.  In this section we question the economic value of the processing fees charged and the Ant "profit sharing" payments accrued to Alibaba.  If Ant Financial/Alipay had charged a market rate for the transaction processing fees and escrow services, Alibaba would most likely be unprofitable.. ....even after taking into account all of the other financial silliness we've discussed above.


Let's take a look at the Profit Sharing agreement with Ant Note 4(a) - F-40

Profit sharing is recorded as the sum of an expense reimbursement plus 37.5% of the consolidated pre-tax income of Ant Financial, subject to certain adjustments.

Income in connection with the Profit Share Payments, net of costs incurred by the Company, of RMB1,122 million, RMB2,086 million and RMB3,444 million, were recorded in other income, net in the consolidated income statements for the years ended March 31, 2016, 2017 and 2018, respectively (Notes 6 and 21).

F-84 - Financial Transactions with Ant Financial and its Affiliates.

• We can infer, as long as the offsets are immaterial, that Ant Financial's pre-Tax Profits are roughly RMB 9.184 Billion (RMB 3.444 Billion/37.5%) or US$ 1.463 Billion. (Let's call it an even US$ 1 Billion after tax to keep things simple.)  This would seem to me to make Ant's US $150 billion contemplated valuation a bit rich at a 150 P/E.  (American Express has a P/E (ttm) of about 25)   
• We can infer that Ant made SME loans in the prior year of  RMB 38.240 Billion (RMB 956 Million /2.5%) or roughly US$ 6 Billion.
• We can infer that the Alipay payment processing fee ratio, if all Alibaba GMV is processed by Alipay, as is generally professed, is roughly 0.13% of all Alibaba transactions (RMB 6.295 Billion/GMV of RMB 4.820 Trillion) in 2018.  This seems like a pretty sweet deal to me since the American Express Service fee, for example, generally runs between 1.5% and 4% depending on the merchant.  Based on Alibaba's current income, if Alipay charged a market rate for the processing fees, Alibaba would likely be unprofitable.
• We also see that the Alipay fee as a percent of total GMV seems to be declining every year.  The fee was 0.15% in 2017 and 0.16% in 2016.  

Finally, it's no secret that China's money supply and debt levels have gone through the roof over the last few years.  We're told by Alibaba Management that Ant/Alipay have apparently ridden the tsunami of new money far into the curl.  Sadly, when money expands like this, defaults, credit issues, tighter underwriting, Non-Performing Loans and write offs are always soon to follow.  It's inevitable.

Even though Ant/Alipay is an integral part of the Alibaba ecosystem, Alibaba management has never felt obligated to disclose even the most rudimentary financial information for Ant/Alipay.  We might argue that neither Ant/Alipay nor Alibaba could exist as they are currently constituted (as silly as that sounds) without the other, yet US Investors in Alibaba only know half of the story.....if that....

Audit Fees (Pg 225)

Executive Summary:

You couldn't successfully audit a good sized publicly held, domestic US Car Dealership for the fees that PWC Hong Kong charges to audit a global enterprise like Alibaba 

I have no idea how PWC can audit this mess for the fees they charge.  Every year, the hours of work required expand geometrically and the fees come in at about what you'd charge to audit a large US/Domestic publicly traded  Car Dealership.  Keep this in mind, Alibaba now has 920 Operating Units (Did I mention that?) scattered all over the globe, a massive Capital Structure "Enhancement", with many of these WFOE's and VIE's located in the PRC and all of these entities are audited from the PWC Hong Kong office.  If I were trying to audit this we'd have substantial travel, staff time and training on both IFRS and GAAP accounting treatment and methods.  All to be researched and applied to myriad business combinations, sales, mergers and divestitures.  Incredibly, PWC Hong Kong does the whole thing, including tax services and consulting for US$12.8 million dollars ($13,900 per business unit @ US$12.8 million/920), up from US$ 8.4 Million the prior year.  PWC is the the new "Dollar Store" of public accounting.

Share-Based Compensation

Executive Summary:

Last year, if SBC were handed out on a pro-rata basis, Alibaba would have issued the equivalent value of $116,000 to every one of its 66,000 full time employees.  (42,565,654 shares at US$180/share)

When we look at the amount of Share-Based Compensation handed out to just about anyone with a pulse or any sort of a relationship with the Alibaba ecosystem we are amazed.  In 2018 SBC expense was US$3.201 Billion, a 25% increase from the prior year representing roughly a third of the company's Net Income.  I'd challenge my readers to show me any other mature business that has ever delivered SBC to their "ecosystem" employees in amounts or value anything close to this level.  In 2018, 42,565,654 new shares were issued (Described on F-10) at a current value of US$7.662 Billion (@ US$180/share)

If every one of Alibaba's 66,000 employees received a pro-rata distribution of these shares, the average SBC "bonus" would be US$116,000 per employee.  Again, it's no wonder everyone wants to work at Alibaba!
The financial equation/math for the above calculation is: SBC x ∞ = WTF


Conclusion

Executive Summary:

1.) This financial cancer is everywhere. Western Markets are screwed.  The outcome is certain and the party is over.   At some point in the indeterminable future, the world will be tasked with cleaning up the mess.

2.) Oddly enough....you can't short Alibaba.....yet.

Alibaba Management is somehow increasing the length and content of their 20-F's, yet, incredibly, they seem to disclose and communicate an even smaller snippet of "meaningful" financial information every year.  In fact, there's no longer any doubt in my mind, that they actually go out of their way to deliver ever larger bales of content-free financial silliness.  They are not "unfamiliar with Western Financial Reporting Conventions" or doing things "the way they do it in China" as some pundits would have us believe.  Math is math no matter where you are on the planet.  Gravity is the same whether you are in London, New York or Beijing.   Alibaba Managers are in fact masters of manipulation, bending the truth brilliantly to suit their needs.  Perhaps they are banking on the premise that nobody actually reads their filings/drivel anyway? (The SEC staff doesn't seem all that concerned!)

If, by some strange, impossible happenstance, I'm completely, totally wrong.... and Alibaba isn't actually the tip of the spear for the CCP's full frontal assault on the Western Financial System, the only other conclusion I can possibly come to is that Alibaba the goofiest, most convoluted, opaque, mis-managed accounting mess and business structure in history.  That, unfortunately, is the "best case" scenario.

Yet, Alibaba (BABA) continues to trade higher as increasing numbers of shares find their way into US Financial/Custodial Institutions.  Because its value, like the RMB, at least for a time, is pegged/driven by the CCP through off-shore mechanisms, the risk of collapse grows larger by the day.  At some point it all has to come tumbling down.  But when?  That's the immediate, multi-trillion-dollar question.

The next, more cerebral, philosophical question that we have to ask ourselves is:

"Why in the world do we even bother with Public Accountants, Audits and the SEC.... or any financial regulation at all for that matter?"  

I'm serious, why bother?  Let's just take our stock picks from our airport taxi driver or bar tender and be done with it.  These silly "stamps of approval" and mountains of gyrating, made-up paperwork just give untrained, novice, dufus investors a false sense of security anyway.  "It must be ok!...it's audited...and it's listed on a major exchange!"

We're investing in a brave new world right now.  Why don't we just openly acknowledge that it's OK for management to put anything they want in a financial statement as long as they smile and sell it with a straight face during the investor call.  Auditors, Analysts and Regulators passively do what they're told.  They don't want to rock the boat (or lose their jobs)....so they sign off on just about anything that's put in front of them, no matter how absurd it is.  It's just easier that way....conflict is tough.

Of course, the genesis of all of this crime and (lack of) punishment rests on our long held understanding that there are, and will always be, minimal (if any) repercussions for financial scam artists and con men.  Only the most egregious/obvious non-politically-connected, domestic fraudsters, within the reach of US Regulatory jurisdiction, ever go to jail.   And even then, if the crooks are naive or unlucky enough to get caught with their hands in the till, with proper planning, they are most likely set for life with a pile offshore/island money anyway.  Even as the doors to the gray-bar resort-hotel and spa slam shut behind them.....usually for only a few months with good behavior and a couple of appeals, they begin planning their book tours, locating new funding and with luck, a Netflix series if all goes according to plan.

That said, don't worry about Jack, Joe, Maggie, Daniel and the good old boys at the Big Banks, PWC or the SEC....I'm sure they'll all be fine.

FINAL NOTE: YOU CAN'T SHORT THIS BEAST!

In anticipation of the question that I'm always asked whenever I comment on BABA .... I'll say it again....You can't short this stock until there are clear signs that the CCP is capitulating.  None of those signs are present yet.  The CCP/PBOC has the other side of your trade.  This ain't your normal, everyday, fraud.  It's a conspiracy that spans the globe.

Like the RMB, because of the offshore price support, Alibaba could hold steady in its current trading range for the foreseeable future...or it could go to $300.  I promise, I'll let you know when Xi has thrown in the towel.  Again, from what I can see, we're still a long way off.

Alternatively,  if US Regulators, Policy Wonks, Bankers and Politicians don't wise up.....Xi won't be the one tossing in the towel....


Additional Reading

The 2018 Alibaba 20-F
https://www.sec.gov/Archives/edgar/data/1577552/000104746918005257/a2235254z20-f.htm#balance

The 2017 Alibaba 20-F
https://www.sec.gov/Archives/edgar/data/1577552/000104746917004019/a2231121z20-f.htm