tag:blogger.com,1999:blog-7478408299955066555.post4091179628664620263..comments2024-02-21T05:08:31.128-05:00Comments on Deep Throat: Alibaba's 12/31/17 Financials & the 2/1/18 Quarterly Investor Call.....Deep Throathttp://www.blogger.com/profile/02712515268051858186noreply@blogger.comBlogger55125tag:blogger.com,1999:blog-7478408299955066555.post-7579987528962983532018-10-12T07:25:01.077-04:002018-10-12T07:25:01.077-04:00Always interesting read. Re the Share Based Compen...Always interesting read. Re the Share Based Compensation and why it is so high. According to the share plan in their pre IPO sec documents these awards can technically go to anyone, not only staff or management but also 3rd parties, natural persons or corporate entitities. They even have an interesting term for it "Service Provider" ����. Ate de Jongnoreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-37869509930119482682018-02-28T20:13:12.914-05:002018-02-28T20:13:12.914-05:00Really interesting read. I appreciate the time and...Really interesting read. I appreciate the time and effort you've put into your findings and publishing it. Thank you.Anonymoushttps://www.blogger.com/profile/10797246325067478168noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-59240867210716000222018-02-21T10:08:10.230-05:002018-02-21T10:08:10.230-05:00That's the one! The Press Release will be fo...That's the one! The Press Release will be forthcoming....LOLDeep Throathttps://www.blogger.com/profile/02712515268051858186noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-60661201813426478982018-02-21T09:29:02.896-05:002018-02-21T09:29:02.896-05:00I may have the wrong company, but WASU Media Holdi...I may have the wrong company, but WASU Media Holdings (000156 CH) has had its trading halted since Christmas as its entered a "major asset restructuring program". Perhaps it can make a re-appearance under BABA's equity investees?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-21348376101389351352018-02-20T15:47:10.926-05:002018-02-20T15:47:10.926-05:00PA Investor.....I don't know who you are....bu...PA Investor.....I don't know who you are....but based on your commentary there is a good chance that we are "twin brothers from different mothers". I'll look forward to perusing Mr. Henderson's commentary....Deep Throathttps://www.blogger.com/profile/02712515268051858186noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-84961097138378399792018-02-18T14:34:48.914-05:002018-02-18T14:34:48.914-05:00Here is a link to some commentary from Janus Hende...Here is a link to some commentary from Janus Henderson on a recent trip to China. The comments on Alibaba are particular relevant to this discussion. <br /><br />https://blog.janushenderson.com/em-equities-notes-from-road-china/?utm_campaign=Blog_EM_China&utm_medium=Social&utm_source=LinkedIn&utm_content=MarketsPA Investornoreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-51116353875019306532018-02-18T13:36:40.424-05:002018-02-18T13:36:40.424-05:00I have not read all of your posts but I did read t...I have not read all of your posts but I did read that one and some others thanks to a shout out from Christopher Balding and his blog on http://www.baldingsworld.com. Comrade Balding has a great twitter feed. Economic commentary combined with cigars and bourbon and children's stories. That is a great combination! I went back and re-read that "theory of relativity" and it was worth the time. <br /><br />Back to the comments in your reply, I certainly agree. On one hand I think it is remarkable the degree to which China has developed over the last 20 years but at a very significant cost that has yet to be paid. Capitalism enables the creation of vast concentrated wealth when it is not managed by a responsible government. The power of "creative destruction" serves as a check on excess profits because new entrants tend to find a better/cheaper way to provide a similar product or service and substitution reduces demand for expensive things. In theory the final customers are able to capture the majority of the economic benefits of competition. However when you have single party rule that is absolute the normal checks and balances of political and economic power don't happen. You almost inevitably end up in a situation where capital is allocated on the basis of political connections not economic merit and that distorts the normal price signals and behavior that would otherwise occur. <br /><br />I don't think anyone knows exactly how/when this will play out but I certainly know that I do not want to be scrambling for the exists along with everyone else. I am definitely prepared to give up upside in order to avoid the downside which will be very ugly. I'm even willing to make reasonable wagers buying out of the money puts because I think the downside is currently under-priced. Optimism is just way to high in so many respects. <br /><br />I look forward to your next post. Thanks again for sharing your time and thoughts with the rest of us!PA Investornoreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-72479720525918159432018-02-16T14:21:58.620-05:002018-02-16T14:21:58.620-05:00After just glancing through a series of rambling, ...After just glancing through a series of rambling, merit-less "you ignorant China Basher" comments this afternoon and chucking same in the e-waste bin.... this is refreshing commentary Mr. PA Investor.<br /><br />The only thing I'd add to your comments above, since through this blog and the resulting relationships I've developed along the way, I feel I've really gotten to understand Chinese management/financial philosophy. I like to think I offer a unique perspective. <br /><br />At a high level, and I'll gird my loins for all of the hate mail I'm about to receive, I really don't think China's "elite" truly understand (or care about) the difference between what I refer to as "accounting earnings" and "economic earnings"..<br /><br />Simply put, "Accounting Earnings" are what the financial statements say...."Economic Earnings" reflect the intrinsic value of the endeavor to investors and society. In theory, they should be equal, but in practice, they often are not.<br /><br />That said, Chinese managers seem to do everything they can to goose the financial statements (Accounting Earnings) and spend relatively little time on actually developing the business (Economic Earnings). The lion's share of their effort is spent raising capital in the belief that borrowed/raised money is the same "earned" money. They make no distinction. <br /><br />Why should they? Throughout their careers they've never had to worry about making a payroll or providing "real" earnings....they goose the financials, put out a press release and go to the bank or debt markets where a fellow party official is more than happy to fund the folly. Over the last decade US/EU/Swiss IB's have joined in the fun....for a reasonable fee of course.<br /><br />I'm not sure how long you've been following my work, and not to toot my own horn, but I thought I described the macro phenomenon pretty well in my "Theory of financial relativity" post a couple of years ago...<br /><br />https://deep-throat-ipo.blogspot.com/2016/08/the-theory-of-financial-relativity.html<br /><br />The moral hazard of continually funding global financial folly still exists...and always has....but the question I pose is "can we truly kick the can down the road forever?"....so far...we sure can!<br /><br />Thanks for taking the time to read my work.....I think you'll really enjoy my next post...I've been working on it for a while now.....the "China Dream" gets sillier by the day...<br /><br />Deep Throathttps://www.blogger.com/profile/02712515268051858186noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-18974177294121323562018-02-15T17:45:52.034-05:002018-02-15T17:45:52.034-05:00Your "secret" hope is no longer secret ;...Your "secret" hope is no longer secret ;) <br /><br />I can't help but think of the expression that history may not repeat but it certainly rhymes. The Madoff scandal was approximately $60 billion in size (smaller when counting recouped payouts) and the Enron meltdown was also of similar magnitude. What is really surprising about this case is the total market capitalization is so massive. I know the share ownership is concentrated with some very large holders but still any meltdown would be an epic loss of paper wealth. <br /><br />I am a relatively new follower of BABA and it is interesting to go back and read all the questions and suspicions that were being raise back in earlier years. Even when the share price was in the $100/share range there were some rather serious concerns. And yet here we are at $180/share about a year later. Has the company really added that much value over the past year or is it the momentum and easy money causing the price to go up? I think we both know the likely answer to that. <br /><br />There is a really interesting disconnect where China has so much overcapacity in so many areas. Profit margins are incredibly low and many businesses would be unprofitable if commodity prices were not artificially boosted by excess debt and Fixed asset investment. Somehow we are to believe the companies like BABA are able to maintain huge profit margins and positive free cash flow and that it is sustainable for the long term? I think the answer is that profits for shareholders in any "private" company only remain to the extent that company does the bidding of the government masters. If the CCP says you need to invest cash in to XYZ company you better do it or face the consequences. The corporate governance structure is basically set up to deny foreign investors any real "fair" oversight and control over the cash. They will maintain the illusion of profitability as long as they can but ultimately it is a foundation of sand unless the underlying businesses are profitable. PA Investornoreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-17429206298412887842018-02-15T13:20:33.206-05:002018-02-15T13:20:33.206-05:00Thanks for reading my work.....I actually hope, fo...Thanks for reading my work.....I actually hope, for the good of the global economy that I'm wrong. I'm secretly hoping that these are just goofy, honest people who don't know how to write financial statements and are clueless when answering investor questions and/or running a business... but none of the evidence is pointing in that direction. <br /><br />When this blows up, given all of the incestuous global interrelationships, it will make 2009 look like a picnic in the park.....Luckily, Jay Clayton, one of the chief architects of this mess, now the top cop at the SEC, will be there to put the hammer down.....you really couldn't make this stuff up.Deep Throathttps://www.blogger.com/profile/02712515268051858186noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-66586523460520135372018-02-15T13:01:08.556-05:002018-02-15T13:01:08.556-05:00Deep Throat, I thought ALT Perspective's respo...Deep Throat, I thought ALT Perspective's response was rather unconvincing and the vast majority of comments were the sort of "boosterism" one would expect to see for a $480 billion market cap company with non-transparent disclosure and dubious accounting. <br /><br />Thank you for your hard work to read all the filings and to shed light on the potential wrongdoing. If you are correct this case will be one for the ages. If the era of QE / Easy money is coming to an end it would be rather fitting to go out with a bang watching billions of market capitilization get vaporized when investors realize they have been fooled. PA Investornoreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-50470315466202066732018-02-15T11:51:44.292-05:002018-02-15T11:51:44.292-05:00I saw that....thanks!.....did you get the $5 I sen...I saw that....thanks!.....did you get the $5 I sent you on PayPal?....say hello to Carson for me! Deep Throathttps://www.blogger.com/profile/02712515268051858186noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-39793551030011104172018-02-15T10:49:38.881-05:002018-02-15T10:49:38.881-05:00Hi Deep Throat, Thanks for sharing your concerns. ...Hi Deep Throat, Thanks for sharing your concerns. I have penned my thoughts on them here: https://seekingalpha.com/article/4145619-alibaba-dear-muddy-waters-responses<br /><br />Appreciate your feedback, if any. Cheers.ALT Perspectivehttps://seekingalpha.com/author/alt-perspective/articlesnoreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-38659663230584223992018-02-14T21:44:24.566-05:002018-02-14T21:44:24.566-05:00Amazing.....I had not seen that...Amazing.....I had not seen that...Deep Throathttps://www.blogger.com/profile/02712515268051858186noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-1559635809059373042018-02-14T19:35:57.317-05:002018-02-14T19:35:57.317-05:00Yes that appears to be the case. Not comforting.
...Yes that appears to be the case. Not comforting.<br /><br />And sorry to blow up the comments, but another infuriating blip of information:<br /><br />Just one month, ONE MONTH, after Alibaba submitted those answers about Xie to the SEC, arguing that he is a nobody (in a letter cc'd to future SEC Chairman Jay Clayton), Reuters ran this article:<br /><br />https://www.reuters.com/article/alibaba-group-ipo-xie/insight-simon-xie-jack-mas-unassuming-lieutenant-at-alibaba-idUSL1N0RC0A820140914<br /><br />Excerpt: "But for investors in Alibaba Group Holding Ltd’s potentially record initial public offering, Simon Xie, a co-founder and vice president, represents one of the e-commerce company’s most important figures: he’s the only individual besides Executive Chairman Jack Ma who owns the domestic Chinese companies and holds the operating licenses that underpin Alibaba’s corporate structure.<br /><br />Alongside Ma, who holds the lion’s share of those domestic firms, Xie wields full legal sway over the onshore entities and the critical contracts that link them with the New York-listed vehicle.<br /><br />Yet much remains unknown about Xie, and the unusual shareholding arrangement has puzzled even high-level insiders. Some employees, said a former executive who worked closely with Xie, jokingly refer to the unassuming 45-year-old as shoufu - or “top millionaire” - even though he is not among the very top Alibaba shareholders."...<br /><br />“Simon Xie is clearly the most important person in Alibaba who is not part of the steering committee,” said Fredrik Oqvist, the Beijing-based founder and CEO of ChinaRAI, a consulting firm that advises hedge and mutual funds. “He pops up everywhere, yet he’s elusive.”<br /><br />The rest of the article basically says Xie is not ambitious so was passed over as a top leader, and that he is unswervingly loyal to Ma. <br /><br />Hmmm. A pliant, elusive lieutenant who "pops up everywhere", and whose role is clearly lied about to the SEC. Doesn't seem fishy at all.MungerFanhttps://www.blogger.com/profile/06984909290765667656noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-6274874562395813802018-02-14T16:21:10.201-05:002018-02-14T16:21:10.201-05:00The most important thing that you've indirectl...The most important thing that you've indirectly touched on is: The SEC stands back and does nothing. Their position, by default, must be that they are no longer a regulator. They are a facilitator or capital formation. They step in to clean up the mess right after they learn about it on the front pages of the NYT or WSJ. <br /><br />The SEC will ask a few questions about the filings and that's it. They believe that's enough even though nobody reads filings anymore. Mr. Market somehow believes, for whatever reason, that every listing has an SEC/regulatory stamp of approval. Nothing could be further from the truth. I've mentioned this many times now, but when these things (ADRs/Stocks listed on US Exchanges) blow up, as they invariably do, the SEC and the FBI don't get on the first plane to Beijing or Guangzhou and put people in handcuffs.... The foreign managers and promoters walk away with the cash and US Investors are simply hosed. To turn it around....why would anyone expect ANYTHING to be truthful in these filings?Deep Throathttps://www.blogger.com/profile/02712515268051858186noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-33276875037548190432018-02-14T15:55:00.332-05:002018-02-14T15:55:00.332-05:00One more thing, a paragraph from the 2014 SEC corr...One more thing, a paragraph from the 2014 SEC correspondence regarding Simon Xie that you translated to BST:<br /><br />"With regard to the language of Item 6.A of Form 20-F requiring disclosure of certain information concerning “employees such as scientists or designers upon whose work the company is dependent,” the Company respectfully submits that this requirement applies to employees whose specific skills or technical expertise make them indispensable to a company’s operations and where the loss of such an employee (who, by the nature of his skills and expertise, is not readily replaceable) would materially affect a company’s ability to engage in its core business. A plain reading of the language of Item 6.A, which refers to scientists and designers as the representative examples of such employees, as well as a review of past comment letters issued by the Staff in other transactions confirms this view. The functions Mr. Xie serves cited by the Staff, including his function as a minority VIE equity holder, are roles that could be filled by any trusted long-time employee, and these are not roles, such as those of a key scientist, engineer or designer, that involve a unique skillset or high level of training that render the Company “dependent” upon such employee. As one of five vice presidents involved in domestic China investments, his role is to identify and execute investments, but he cannot be called someone upon whom the Company is dependent."<br /><br />Note the last sentence. I think this important point was lost in your still excellent BST translation. How can a man who was one of Alibaba's 18 founders and whose "ROLE IS TO IDENTIFY AND EXECUTE INVESTMENTS" NOT be someone on whom the company is dependent? Does Alibaba not depend on the success of Xie's investments? <br /><br />If we take Alibaba at their word, Xie's investment abilities are so run-of-the-mill that he could be replaced by a monkey and Alibaba would be no worse for wear. If this is true, what does this tell us about the quality of Alibaba's investments in China that so many BABA "investors" are so willing to believe are phenomenal even in the absence of coherent financial statements (Xie "serves as a vice president on the Company’s domestic China investment team and is involved in projects related to the Company’s domestic China acquisition and investment activities.")? And if it's not true that Xie could be replaced by a monkey (or more realistically a janitor as you suggested), why isn't this a violation of the law?MungerFanhttps://www.blogger.com/profile/06984909290765667656noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-88156717108823537742018-02-14T15:52:07.266-05:002018-02-14T15:52:07.266-05:00He's a visionary....LOL! Could you imagine wh...He's a visionary....LOL! Could you imagine what might happen to BRK if it was announced that Buffett "invested tens of millions" in Bitcoin?<br />Deep Throathttps://www.blogger.com/profile/02712515268051858186noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-25693070838308290512018-02-14T15:02:42.098-05:002018-02-14T15:02:42.098-05:00Hah I remember this post, but did not remember Shi...Hah I remember this post, but did not remember Shi Yuzhu. From a quick google search, looks like he's recently bought into OKcoin, a cryptocurrency exchange! I haven't looked to deeply into this at all but if it's true LOL<br /><br />http://bitcoinist.com/chinese-billionaire-and-giant-network-ceo-invests-tens-of-millions-acquires-10-stake-in-okcoin/MungerFanhttps://www.blogger.com/profile/06984909290765667656noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-11469636330456925992018-02-14T10:20:37.834-05:002018-02-14T10:20:37.834-05:00I'm sorry......I'm cracking up while I'...I'm sorry......I'm cracking up while I'm reading what I wrote back in 2016. I forgot all about it & I have to re-post here...same citation, the June 2016 post....Love the "Dick Fuld Bankerspeak Translator" BST.....it's just so silly....<br /><br />Here's a follow up on pg 7 of the same August 12th, 2014 Document.<br /><br />SEC: Please address in this risk factor any potential material conflicts of interest between you and Simon Xie and expand this risk factor to discuss any potential material conflicts of interest resulting from the manner in which you plan to invest in Wasu Media Holdings Co., Ltd. It appears that the disclosure required by Item 6.A of Form 20-F is applicable to Simon Xie. In this regard, we note your apparent dependence upon Mr. Xie based on his role as one of your founders and as a member of your management, as well as his equity interests in Alipay, your material VIEs, and the partnership through which you plan to invest in Wasu Media Holdings Co. Please provide the disclosure required by Item 6.A of Form 20-F and in doing so disclose Mr. Xie’s roles and responsibilities in your company and where Mr. Xie falls within your management structure.<br /><br />SEC - BST: "So you are making the loan to the partnership owned by Simon, Jack and Yuzhu Shi? The partnership is going to buy the stock of Wasu media? That's the same Yuzhu Shi, the guy who went bust trying to build the tallest skyscraper in China (that was never actually built) and then took a video game company, Giant Interactive public on the NYSE, raised $1 Billion on the IPO, milked it for all it was worth and took it private in China at a deep discount with US Shareholders left holding the bag? .......is that the same Yuzhu Shi that you are jumping into bed with on both Wasu and Yunfeng Capital?? And you don't see any conflict of interest here? Really?" <br /><br />Here's the BST version of the Alibaba Response:<br /><br />Alibaba Respondent: - BST "Wowww....you guys are really sharp! You've actually read through the whole filing and you know your securities law to boot! Ok, here's what's really going on. You think that Simon actually works here and that his employment would make him an employee 'upon whose work the company is dependent' as defined in Item 6.A of Form 20-F. Again, you've got it all wrong. Simon, is a peon, a nobody, he pushes a broom around and occasionally opens the mail....that's it! In fact, if you don't let us structure this deal this way we're going to fire his sorry ass so that there is absolutely no conflict under 13(k). Of course, we're still going to give him a Billion dollars, just 'cuz we want to and you can't stop us. Moreover, Yuzhu Shi is a wealthy visionary and great man. He was able to amass a tremendous fortune by creating fake businesses out of nothing, pulling all of the cash out of them and selling the decaying shells to suckers....uh....I mean fortunate investors. Anyway, all of these people are safe in China and you have no jurisdiction over them. So mind your own beeswax."<br />Deep Throathttps://www.blogger.com/profile/02712515268051858186noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-90978879241926639272018-02-14T10:07:37.801-05:002018-02-14T10:07:37.801-05:00No trouble at all.....the cites are in my June 201...No trouble at all.....the cites are in my June 2016 post under "SEC Process"<br /><br />https://deep-throat-ipo.blogspot.com/2016/06/follow-up-thoughts-on-i-would-never.html<br /><br />I forgot how much fun I had writing it....thanks for reminding me!.....here's my "BST" commentary for your pleasure:<br /><br />Alibaba Respondent: - BST "Ohhhh!.....I see what you are getting at. You've got it all wrong. Here's what's really going on. The loan to Simon isn't a 13(k) 'personal' loan....it's a 'business' loan! See, even though the money is going to him, Simon is going to take the money and contribute it to a partnership that he and Jack have cooked up, and once the money is sufficiently laundered, the partnership is going to 'invest' it in Wasu Media, since Wasu media has a strategic relationship with Alibaba. Jack isn't getting the money (It's going to a partnership) so he's not in violation of 13(k) either! That's why we did it this way!....That way, Jack and Simon get a billion dollar loan, they can do whatever they want with the proceeds, maybe invest in Wasu, maybe not. Moreover Simon isn't a qualifying executive under 13(k)...he's not a director or 'senior' manager.....we just want to give him a BILLION DOLLARS since he's a good guy.....he's just one of five 'strategic' vice presidents! Who knows, if this works we might give all five of them a BILLION DOLLARS each! US Shareholders are really generous that way. That way all of the VP's can get access to Billions of US Shareholder Dollars, for 'strategic purposes', pay the interest from loan principal until the investments pay off (or not) and nobody is the wiser! Isn't this an AWESOME IDEA! If you guys sign off on this one we will be actively looking for homeless people to start partnerships with Jack. We understand that in America you can go to jail for things like this, but in China it's SOP. We're sure glad you understand how this works now. Thanks for asking about it."<br /><br /> Deep Throathttps://www.blogger.com/profile/02712515268051858186noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-90860739860916044472018-02-13T20:16:30.186-05:002018-02-13T20:16:30.186-05:00Sorry to trouble you but would you have a link to ...Sorry to trouble you but would you have a link to the SEC correspondence referencing the impropriety of the Xie transactions? Great work here btw, i thoroughly enjoy your work. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-69926988808622045102018-02-13T08:36:24.736-05:002018-02-13T08:36:24.736-05:00Sure....He seems like a really nice guy. I think ...Sure....He seems like a really nice guy. I think it's great that in America everyone has a voice and can be heard. That said, I took a minute to click on Mr. Alt Perspective's "Show your support" link. I sent him the $5 he was asking for through PayPal. I hope my contribution makes a difference in his life. I like to help when I can. Deep Throathttps://www.blogger.com/profile/02712515268051858186noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-60385650927720381212018-02-13T08:12:17.185-05:002018-02-13T08:12:17.185-05:00I've mentioned the Simon Xie connection severa...I've mentioned the Simon Xie connection several times. A $1 Billion loan to lever up and buy WASU? Unbelievable! There's also SEC correspondence referencing the impropriety of the Xie transactions. If Jamie Dimon or Warren Buffett took $1 Billion of shareholder money and paid it out to a buddy to speculate on stocks and real estate there would be congressional investigations.....with Jack & Simon, it's business as usual.Deep Throathttps://www.blogger.com/profile/02712515268051858186noreply@blogger.comtag:blogger.com,1999:blog-7478408299955066555.post-14350062622728626522018-02-12T22:33:36.171-05:002018-02-12T22:33:36.171-05:00The author in that article appears to rebut each o...The author in that article appears to rebut each of your points. Any response?DHHhttps://www.blogger.com/profile/02540449925718102488noreply@blogger.com