ALIBABA’S PAST ANOMALIES ON TRANSPARENCY
Alibaba Group Holding Limited had been flocked with several concerns and criticisms regarding their disclosure of financial reports since they went public three years ago. Several experts hint they have been secretive of crucial details about its operations. There are also accusations that they have been exaggerating positive results and downplaying negative ones. This has been an obstacle in terms of their valuation, as it gives rise to investors skepticism. Despite this, the management defended the company and insisted all their data on their subsidiaries as well as users were elaborate.
Last year, suspicions regarding the firm’s misconduct were heightened after a conference call that occurred in the third quarter wherein 10 analysts prepared queries for four of the retailer’s executives about the way they report information. One of them asked CEO Daniel Yong Zhang to clarify their process of publicizing a part of their advertising expenses. Although the chief answered, he avoided getting into the disclosure part and when pressed for a follow up statement, ended the call.
The reported figures of the e-commerce firm were also inconsistent. It’s transaction values have been deteriorating in the past years, although it may look expensive due to its rich valuation. In addition, it is also struggling amid a tight competition with similar companies such as JD.com.
Despite this, the main problem lies with their transparency. Their transaction volumes have been increasing and surpassing those of giant internet entities such as Facebook. An expert also commented that their metrics are not in line with that of the government’s record. For example, their claims of having 367M users were seen as odd because this tally represents the totality of all online shoppers in the nation. Aside from this, they also stated that the average amount a customer spends on their site reaches $1,215 annually but an ordinary shopper from US takes out $1,655 yearly and the US capital per economic output is seven times greater than China.
Several observers have also expressed their doubts on their use of off-balance-sheet entities, citing that the business does not include their shipment operations in their financial statements. Figures of their Cainiao network were also disclosed separately, initiating a SEC investigation in its accounting practices.
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