As always, there’s a lot to digest….here are the links…
Press Release
https://www.alibabagroup.com/en/news/press_pdf/p210202.pdf
Presentation
https://www.alibabagroup.com/en/ir/presentations/pre210202.pdf
Webcast
https://edge.media-server.com/mmc/p/bfzgfjdh
SEC 6K Filing
https://www.sec.gov/Archives/edgar/data/1577552/000110465921011016/a21-1839_6ex99d1.htm
Transcript
https://news.alphastreet.com/alibaba-group-holding-limited-baba-q3-2021-earnings-call-transcript/
I’ll be brief and skip over the nonsensical, choreographed, irrelevant “if you were a tree…what kind of tree would you be?” vision of the world, analyst questions… and the even sillier management responses….and cut right to the chase.
1.) Net Income for the quarter was $12.2 Billion. This figure included Valuation Gains (Asset Write Ups) of $5.7 Billion, and Equity Method Accounting Income of $735 Million from Ant Group. If we subtract these accounting Shenanigans from Net Income we have $5.8 Billion remaining in the Quarter. i.e.) More than half of their income for the quarter was generated from journal entries and unbridled bookkeeping enthusiasm.
2.) This $5.7 Billion Valuation Gain, by my calculation, puts total Accounting Shenanigan (Asset Write-Ups) at more than $60 Billion, or roughly ¾ of the $88 Billion of Retained Earnings currently on the books accumulated since the IPO. (If you recall, BABA was maxed out on their bank credit lines at the time of the IPO. Thank God they were fortunate enough to find an angel in America, so to speak, courtesy of US Bankers) I’m just guessing that a $66 Billion write down (loss) booked in an upcoming quarter, wiping out most of Alibaba’s Retained Earnings would cause a bit of a ruckus…..I’m really surprised Jay Clayton never asked about any of this…oh well, maybe the new guy will catch on.
3.) The 33% of Ant Group Income for the quarter was disclosed as $735 Million, making the Net Income of Ant Group $2.2 Billion for the Quarter. According to the IPO Application Proof which was shelved by Chinese Regulators, virtually all of ANT Group’s Retained Earnings of ¥44 Billion (US$6.3 Billion) accumulated since the group’s incorporation in China in October 2001, were generated in the 18 months ending June 2020. Moreover, during the two and a half year period (2018, 2019 and thru June 30th of 2020) “Related Party Income” amounted to ¥20.8 Billion (US$3.0 Billion) or nearly half of ANT Group’s Retained Earnings since 2001. Somehow Ant Group suddenly found a way to book, in one quarter, the equivalent of 1/3 of the Net Income they’ve generated since 2001. If you’d like more info on the perverted financial relationship between Alibaba and Ant Group feel free to visit my Analysis of the “IPO That Never Happened” written and posted just before the Chinese Communist Party pulled the plug and put it out of its misery. This filing/mess was so bad it was even unacceptable for the CCP….. “The Theater…the Theater….how I love the Theater!”
4,) The number of employees more than doubled during the quarter to 252,084 employees, compared to 122,399 in the September 2020 quarter due to the consolidation of Sun Art, a Chinese discount grocery/tchotchke chain. Financial details of the transaction weren’t disclosed. i.e.) When you buy BABA shares, you are not buying a “Global eCommerce Giant”….you are buying a chain of Chinese “Dollar Stores”
5.) They announced a 37% YOY Revenue Increase (RMB 60 Billion). The increase was due entirely to the consolidation (purchase) of Sun Art, and the “brick and mortar” direct sales businesses, Tmall Supermarket, Freshippo, and the consolidation of Kaola starting in September 2019. Figures were not disclosed, but if we do some “back of the envelope math” based on data gleaned from D&B and other sources this revenue is roughly RMB 70 Billion. Therefore, the headline should have been “eCommerce YOY Revenue actually decreased by 6% in the quarter”.
6.) MAUs (Mobile Active Users) increased 8% YOY and AAC (Annual Active Customers) increased 9% YOY, further indicating a slowing in China eCommerce. (Authors note: I’ve never put stock in these metrics anyway….I find it hard to believe that 902 million people (MAUs), 70% of the population, including little kids and elderly rural non-tech savvy folks, in a country where the GDP per ca-pita is US$8,000, are madly ordering stuff on their smart phones at anywhere near that level…..but that’s just skeptical old me.)
7.) Share Based Compensation chugged along at $1.4 Billion for the Quarter and $6.4 Billion year to date. This sounds like an awful lot of US Shareholder money to send to “Friends & Family” Cayman Island Shell Co’s & LLCs to me, but heck, what do I know.
8.) Right on cue, shortly after announcing these absurd, fake numbers, the Alibaba P/R department announced their plan to sell yet another $5 Billion in USD Denominated bonds to dumb-ass global investors, even though 90%+ of the Alibaba business is done on Mainland China in RMB. Makes perfect sense. Bloomberg
What we have here is Alibaba, the crown jewel and tip of the financial spear of the Chinese Communist Party “US Dollar Grab Ponzi”, running out of a nondescript little Trident Trust (ShellCo factory) in the Caymans, masquerading as a $675 Billion Market Cap ADS on the New York (and Hong Kong) Stock Exchanges, where their primary source of Retained Earnings and economic value seems to be Valuation Gains, and Asset Write Ups from Accounting schemes, as well as newly discovered pass through (questionable) income sources from Ant Group and related parties. The fable is further enhanced by the Chinese Communist Party participation, in a wonderfully produced, made for Reality TV Drama, intended to convince naive sheep investors that the CCP is making every effort to protect them and convince the world that even though there is indeed an ongoing, irrepressible outbreak of independent, genius rogue capitalism sweeping through China, that they also must recognize this is the dawn of a new day. They are becoming a kinder, gentler CCP, and more than willing to harness and manage the brilliance and growth, working side by side with these swashbuckling entrepreneurs and free spirited tech titans bent on sticking it to “the Hanfu suits”….i.e.) they need to clean up the loose ends of these frauds, so even an insurance guy in Cleveland can’t figure it out….. they know that they must make them much more believable if these shakedowns are to actually succeed ….it is indeed a new day in China….
The Robin Hood dudes are going to eat this shit up….
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If you have Questions feel free to reach out to any of the good folks below as they are the (highly compensated) experts on the call who truly understand the inner workings of this mess….although, as I mentioned, their questions don’t seem to reflect it:
Edward Leung — Bank of America Merrill Lynch — Analyst
Gregory Zhao — Barclays Investment Bank — Analyst
Alex Yao — JPMorgan Chase & Co. — Analyst
Alicia Yap — Citigroup Global Markets Asia — Analyst
Thomas Chong — Jefferies — Analyst
Jerry Liu — UBS Securities Asia Limited — Analyst
Youssef Squali — Truist Securities — Analyst
James Lee — Mizuho Securities Company Limited — Analyst
Binnie Wong — HSBC — Analyst
Finally, for all of of the Class Action Lawyers reading this post, all of the above firms have US Registered Agents and offices ready, willing and able to accept service when this debacle eventually hits the skids.