A “High Up” Insider Said To Be Helping SEC In Alibaba Probe [REPORT]

Alibabaalibaba by sam_churchill on 2014-05-07 09:46:21

Alibaba is currently facing a federal probe, and it seems that the matter won’t be settled anytime soon. According to the New York Post, the SEC is getting help with their investigation from an insider. The Chinese firm is facing heat for its controversial accounting practices, and one or more whistleblowers are reportedly at work to surface its anomalies, reports The Post.

Insider helping SEC?­

Citing a source aware of the situation, the Post says that one mole was identified as a “high-up” official at Alibaba who played a major part in getting the investigation started. In May, the e-commerce giant disclosed that the SEC is probing the complex transactions between its Cainiao logistics arm and dozens of other business affiliates, along with some discrepancies in the way the company reports its annual Singles’ Day shopping festival.

Further, the sources revealed that it is not known if the official is still working under Jack Ma, but he is definitely helping the SEC in hopes of a reward. The investigation could span a few more months, and the SEC is reportedly deploying other whistleblowers in the company to fetch the required information, the source told the Post.

Short-sellers such as Jim Chanos doubt the fairness of transactions at Alibaba and alleged that Cainiao is being used to cover the losses on Alibaba’s balance sheet. Short-sellers also doubt the Singles’ Day festival sales, claiming that the numbers may be inflated by fake transactions or sales from canceled orders.

Analysts still bullish on Alibaba

Local authorities in China have not left any stone unturned in hiding the complex and doubtful ways in which Alibaba operates, says the Post.

Donn Vickery of Pacific Square Research, a firm that raised questions about Alibaba’s accounting said, “There are laws within China on what[Alibaba] can turn over or not turn over, and that could support the company being nonresponsive” to the SEC.

Vickery added that if there is a whistleblower, then the possibility of someone giving access to the documents increases. However, other analysts are still looking at the value that the company can offer. Alibaba shares have increased around 30% in 2016, compared to around 8% for the S&P 500 index, including dividends.

Recently Citigroup released its sum-of-the-parts analysis, which showed that Alibaba is more valuable than understood. Alicia Yap of Citigroup increased her price target to $133 from $112. Also Goldman Sachs analyst Piyush Mubayi recently said that Alibaba was his favorite Chinese internet pick.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com

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