Weekend Update 02/11/2019 Do Smoke And Mirrors Hide Fire?

Baltic Dry Index. 1697 -85 Brent Crude 61.69  Spot Gold 1514

Never ending Brexit now January 31, maybe sooner.

Trump’s Nuclear China Tariffs Now in effect.

The USA v EU trade war started October 18. Now in effect.

Things are seldom what they seem,
Skim milk masquerades as cream;
Highlows pass as patent leathers;
Jackdaws strut in peacock's feathers.

HMS Pinafore. Gilbert & Sullivan.

This weekend, the new world order economy, aka the smoke and mirrors economy. But where there’s smoke there’s usually fire. This weekend, are there fires in Alibaba and Airbnb? And if there are, is there also a fire in SoftBank Group?

What, never?  No, never! What, never?  Well, hardly ever!

HMS Pinafore. Gilbert & Sullivan.

Alibaba beats quarterly revenue estimates, shares rise

November 1, 2019 / 11:18 AM

(Reuters) - China’s Alibaba Group Holding Ltd (BABA.N) reported a better-than-expected 40% rise in second-quarter revenue on Friday, powered by strong growth in its e-commerce and cloud computing businesses.

The results come as the company gears up for its annual Single’s Day shopping bonanza this November, and competes increasingly with e-commerce site Pinduoduo Inc (PDD.O) for sales in China’s smaller cities.

The company’s U.S.-listed shares rose more than 2% to $180.25 in trading before the bell.

Alibaba primarily earns income from selling advertising and promotional services to third-party merchants that list products on Taobao and Tmall, two of its e-commerce sites.

Total revenue rose to 119.02 billion yuan ($16.91 billion) in the second quarter ended Sept. 30 from 85.15 billion yuan a year earlier. Analysts were expecting revenue of 116.8 billion yuan, according to IBES data from Refinitiv.

Sales from the company’s e-commerce business rose about 40% to 101.22 billion yuan, while its cloud computing business posted a 64% jump in revenue to 9.29 billion yuan.

The company’s net income attributable to ordinary shareholders rose to 72.54 billion yuan from 20.03 billion yuan a year earlier, due to a one-time gain related to its stake in Ant Financial.

Alibaba, the biggest Chinese e-commerce company and rival JD.com Inc (JD.O) have been looking to diversify as online sales slow amid saturated markets in China’s biggest cities and consumer confidence takes a hit from the ongoing U.S.-China trade war.

For Alibaba, this has meant doubling down on reaching consumers in China’s second- and third-tier cities.

---- In an earnings call with analysts, Alibaba CFO Maggie Wu highlighted how the company’s broad range of apps allows it to appeal to a wide range of consumers.

“Average revenue per user (ARPU) in lower tier cities is not as low as people imagine,” said Wu. “I think we have addressed very well in our taobao apps different demands and levels of consumers,” she added.

In the same call, Alibaba chairman Daniel Zhang also referred to the company’s livestreaming efforts, in which sellers take to third-party services such as Douyin and Kuaishou to push products on Taobao and Tmall, as a “new swimming lane for the company.

Zhang said that over 50% of Tmall merchants have by now used livestreaming to reach customers, adding that while the feature has yet to be monetized, updates on a broader business strategy will come soon.

Excluding items, Alibaba earned 13.10 yuan per American Depository Share. Analysts were expecting 10.65 yuan per ADS, according to IBES data from Refinitiv.

https://www.reuters.com/article/us-alibaba-results/alibaba-beats-quarterly-revenue-estimates-idUSKBN1XB3Z3

Softbank Group says to book $2.56 billion second-quarter gain on Alibaba stake

November 1, 2019 / 1:40 PM

TOKYO (Reuters) - SoftBank Group Corp (9984.T) said on Friday it would book a 277 billion yen ($2.56 billion) gain in the second quarter after portfolio company Alibaba Group Holding (BABA.N) recorded a $9.7 billion gain related to its stake in Ant Financial.

SoftBank, which will report earnings for the July-September quarter on Nov. 6, has a 26% stake in Alibaba and said it will report the gain under income on equity method investments.

E-commerce giant Alibaba earlier on Friday reported a 260% jump in net income attributable to ordinary shareholders due to the one-time gain.

The boost from SoftBank’s stake in Alibaba comes as investors are bracing for big writedowns on some of the Japanese conglomerate’s biggest tech bets when it reports next week.

https://www.reuters.com/article/us-softbank-group-alibaba/softbank-group-says-to-book-2-56-billion-second-quarter-gain-on-alibaba-stake-idUSKBN1XB49Q

But for a more realistic assessment of Alibaba, try this, from August. I’m sure there will be another update to follow in due course. Something about WeWork springs to mind.

Tuesday, August 20, 2019

The BABA Investor Call.......Trade War?...What Trade War?

As I've been doing every quarter since the BABA IPO back in September of 2014, I've taken the time to listen to Thursday morning's investor call, review the presentation and read the press release and 6K for this financial dumpster fire.  For me, like driving past a bad car accident on the freeway, it's difficult and painful to see, but for some reason, I can't bring myself to look away.

The relevant links to same are listed directly below for your own personal amusement and/or self-abuse.

---- For those of you new to this "Alibaba Investor Call" reality show, the format for these quarterly extravaganzas is generally the same.  They open up with a motivational speech by Joe Tsai, describing the nearly boundless, macro opportunities that are just waiting to jump into the lap of every US investor, if they are just bold enough and wise enough to get aboard this unstoppable Chinese Communist express train to riches.

Next Daniel Zhang stumbles and bumbles through some brand new made up metrics for a few minutes and Maggie spends some time going through the fake financial statements.

The call ends with a few analysts displaying their adoration for management genius, extolling their virtues and asking some irrelevant "if you were a tree...what kind of tree would you be?" questions.

In this particular call:

Eddie Leung - Bank of America Merrill Lynch asked about "user engagement in less developed markets" and "synergies"

Piyush Mubayi - Goldman Sachs asked about the "Internet of Things" and "5G"

Alicia Yap - Citigroup asked about the T-Mall Flagship store 2.0 upgrade and "monetization"

Grace Chen - Morgan Stanley  asked about "Margin Performance"  (Maggie said it was fine)

Binnie Wong - HSBC asked about the "strong top line growth"

Gregory Zhao - Barclays Capital  asked about monetization in lower tier cities, efficiencies and priorities.

Jerry Liu - UBS  apparently believes he works for Alibaba since he discussed "our investments that we've done so far this year " and he is  "wondering if there's more monitization we can continue to do to continue this trend".  I, for one, think that it's wonderful that Jerry is so helpful.  He's a part of the 

team.  "Great quarter guys!"

----- What Wasn't discussed in the Investor Call?

I actually think this is much more important than the info in the call.  Here we go.

1.) Alibaba's "Core" Revenue (despite reporting 42% YOY combined growth) is probably in decline

---- Moreover, nearly every third party (Non-CPC published) metric, whether it be new car sales, electricity usage, retail spending, etc. is contracting (check any Western source).   Alibaba is apparently, according to their numbers, impervious to an economic slow down, trade war, recession or any economic trade winds whatsoever.  It defies logic that BABA is somehow generating organic double-digit YOY growth anywhere near what they are claiming without their typical use of accounting Shenanigans.

---- 2.) Operating Margins and Income from Operations are actually on the decline as well

As any senior financial person knows, producing quarterly statements in a struggling organization is an iterative process.  It goes something like this:

---- The second accounting gimmick can be defined as a "generally more aggressive improvement in accounting department attitude".  i.e.) Coming up with creative ways to prevent expenses from hitting the bottom line.  Thanks to the miracle of double entry bookkeeping, when you prevent expenses from hitting profits, either asset values must increase (most popular) or liabilities must be understated (less popular...because the people you owe the money to, generally catch on and complain vociferously).  Otherwise, without either effort (pumped asset values or missed liabilities) the books don't "balance".

---- 3.) The "Gravy Train" to Communist Party Insiders Continues

It's not often you see a business loan hundreds of millions of dollars of US Shareholder money to a Chinese Communist Party member, but incredibly, Alibaba has done it not once, but twice.  The first time was the Simon Xie debacle, where, after running afoul of the SEC for making a direct loan to Simon, BABA restructured the loan and purchased US$1.1 Billion of wealth management products to be pledged as collateral for an unnamed Chinese bank to make the loan to Simon in order to purchase a controlling interest in Wasu Media (Which Alibaba also has an undeterminable ownership position through another partnership controlled by Jack Ma and Yuzhu Shi) is described on pages 42 & 202 of the 2019 20-F.  This is of course, ongoing with Alibaba advancing Simon additional money to pay interest on the outstanding loan.  To be frank, that's never a good sign.      

More, much, much more.

https://deep-throat-ipo.blogspot.com/2019/08/

Up next, Airbnb trying to go public, but how much of listings on Airbnb is real and how much is a scam? If the scams are pervasive, just how much is Airbnb’s IPO worth?

To sit in solemn silence in a dull, dark dock,
In a pestilential prison, with a life-long lock,
Awaiting the sensation of a short, sharp shock,
From a cheap and chippy chopper on a big black block!

The Mikado. Gilbert & Sullivan.

I Accidentally Uncovered a Nationwide Scam on Airbnb

While searching for the person who grifted me in Chicago, I discovered just how easy it is for users of the short-term rental platform to get exploited.

by Allie Conti Oct 31 2019, 12:00pm

The call came about 10 minutes before we were set to check into the Airbnb. I was sitting at a brewery just around the corner from the rental on North Wood Street in Chicago when the man on the other end of the line said that our planned visit wouldn’t be possible. A previous guest had flushed something down the toilet, which had left the unit flooded with water, he explained. Apologetic, he promised to let us stay in another property he managed until he could call a plumber.

I had flown with two friends to the city in hopes of a relaxing end-of-summer getaway. We had purchased tickets to attend the September music festival Riot Fest, where Blink-182 and Taking Back Sunday were scheduled to perform. The trip had gotten off to a rough start even before the call. Around a month before, a first Airbnb host had already canceled, leaving us with little time to figure out alternative housing. While scrambling to find something else, I stumbled upon a local Airbnb rental listed by a couple, Becky and Andrew. Sure, the house looked a little basic in the photos online, but it was nice enough, especially considering the time crunch—light-filled, spacious, and close to the Blue Line.

Now, we were facing our second potential disaster in 30 days, and I couldn’t help but feel slightly suspicious of the man on the phone, who had called me from a number with a Los Angeles area code. Hoping to talk in person, I asked him if he was in the area. He said that he was at work and didn’t really have time to chat. Then he added that I needed to decide immediately if I was willing to change my reservation.

As if he could hear me calculating in my head how much of a hassle it would be to find a hotel instead, he then added something else to his pitch.

“It’s about three times bigger,” the man said. “That’s the good news.”

The bad news, which went unstated, was that I had unknowingly stumbled into a nationwide web of deception that appeared to span eight cities and nearly 100 property listings—an undetected scam created by some person or organization that had figured out just how easy it is to exploit Airbnb’s poorly written rules in order to collect thousands of dollars through phony listings, fake reviews, and, when necessary, intimidation. Considering Airbnb’s lax enforcement of its own policies, who could blame the scammers for taking advantage of the new world of short-term rental platforms? They had every reason to believe they could do so with impunity.

----When I asked about the status of my refund, they ghosted, which led me to contact Airbnb. Though I had been moved to a flophouse and then told to leave early, Airbnb only refunded me $399 of my $1,221.20, and only did so after I badgered a number of case managers over the course of several days. The $399 didn’t even include the service fees Airbnb charged me for the pleasure of being thrown out on the street. But my power was nothing compared to that of a company valued this year at $35 billion, and I figured it was probably the best I could do.

I was thankful I’d gotten the last-minute agreement in writing, but I also started to wonder what had actually happened in Chicago. Unable to shake the sense that this was more than a run-of-the-mill bad host, I started to look for red flags I must have missed. It didn’t take long to find a few. For one, the phone number that the Airbnb host had called me with was a Google number that couldn’t be traced. Through a reverse image search, I also realized that the profile picture Becky and Andrew had used on Airbnb was a stock photo from a website that hosts surfing-themed desktop wallpapers. And when I started going through other people’s reviews of Becky and Andrew’s properties, I noticed some other renters had reported experiences that strangely mirrored my own. A woman said she was forced to switch up her itinerary three minutes before check-in due to alleged plumbing issues. A man said that he was promised a refund because his rental was “falling apart,” though it never materialized.

----Airbnb’s refund policy is based on a complicated rubric that doesn’t say guests need written evidence in order to obtain a full refund but does note the company has “final say in all disputes.” It’s easy enough to see how a scammer might exploit the policies as laid out. If a guest stays even one night in a rental, for example, it is difficult to obtain a full refund, according to Airbnb’s rules. If a host asks a guest to stay at a property that’s different from the one they rented, Airbnb advises the guest to request a cancellation if they’re “not okay with the switch.” In both cases, the rules favor a would-be scammer and place the onus on guests who have just parachuted into an unfamiliar locale with their luggage and have nowhere else to stay that night.

More, much, much more,

https://www.vice.com/en_us/article/43k7z3/nationwide-fake-host-scam-on-airbnb?utm_source=pocket&utm_medium=email&utm_campaign=pockethits

Its Official.. Airbnb is Going Public!

Airbnb has now officially announced that they are going public in 2020. The service, which claims 7m Airbnb listings in over 100,000 cities and 8.2 million guest arrivals in the year to July, was last officially valued at $31bn.

Growing Customer Base... Just Like You!

Over 400 million people have used Airbnb since the website was launched back in 2008. Currently Airbnb provide access to over 7 million unique places to stay in over 100,000 cities and in more than 191 countries and its growing every day.

Do not Miss it...
Invest Early!

Airbnb is more valuable than some global hotel chains such as the Hilton Group and leading airlines such as American Airlines. Airbnb will be the biggest IPO we have seen in years and early investors will see the largest gains.
https://theairbnbipo.com/

Airbnb announces it will go public next year after WeWork delays IPO

Rental service, which has about 150 million users in more than 65,000 cities, was last valued at $31bn in September 2017

Thu 19 Sep 2019 20.48 BST

Airbnb, the home-sharing rental business, is to go public “during 2020”, the company said in a brief statement on Thursday.

The service, which claims 7m Airbnb listings in over 100,000 cities and 8.2 million guest arrivals in the year to July, was last valued at $31bn in September 2017.

The announcement comes days after the We Company, parent of the office-sharing business WeWork, was forced to delay its initial public offering (IPO) after potential investors questioned a $47bn valuation put on it by its largest investor, SoftBank, and corporate culture that concentrates power in the hands of co-founder Adam Neumann.

Airbnb did not clarify whether it has confidentially filed its S-1 IPO paperwork, which would include financial information for potential investors to consider.

The company was founded by CEO Brian Chesky, a 37-year-old former bodybuilder, with two former roommates in 2008, by renting air mattresses in a room in San Francisco.

The company struggled with investor support at first, but it picked up a $600,000 seed investment in 2009 and soon after became a quintessential tech “unicorn” and established its founders and early investors will have the potential to collect billions if taken public.

In its third funding round, in 2011, Airbnb raised $112m from investors that included Amazon’s founder, Jeff Bezos. It picked up another $1.6bn in venture capital (VC) in 2015 and $1bn in 2017, raising a total of $4.4bn in VC investment.

In November the company said it planned to venture beyond renting home-sharing. A project called Backyard, building new homes designed to accommodate short-term rentals, is slated to test prototypes later this year, according to CNBC.

On Wednesday, the company said it raked in more than $1bn in revenue for the second quarter but did not give details on whether it was profitable. As of 15 September 2019, hosts have earned more than $80bn sharing their homes and spaces on Airbnb, the company says.

More

https://www.theguardian.com/technology/2019/sep/19/airbnb-ipo-2020-value

No, Frederic, it cannot be. I don’t think much of our profession, but, contrasted with respectability, it is comparatively honest.

The Pirates of Penzance. Gilbert & Sullivan.

This weekend’s musical diversion.  Vivaldi again, but as you’ve probably never heard him before. Vivaldi in military mode with shades of Pietro Locatelli.

A. VIVALDI: Concerto Grosso à 10 Stromenti in D major RV 562a, Combattimento Consort Amsterdam

https://www.youtube.com/watch?v=UZfp27edTPg

I should have preferred to ride through the streets of Venice; but owing, I presume, to an unusually wet season, the streets are in such a condition that equestrian exercise is impractical.

The Gondoliers. Gilbert & Sullivan.

The monthly Coppock Indicators finished October

DJIA: 27,046 +59 Up. NASDAQ: 8,292 +67 Up. SP500: 3,038 +67 Up.

Another inconclusive month, but all three continued to move up weakly. A buy signal. But, like the Fed, I would await more data.