9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 1/18

FINANCE ALIBABA GROUP INC.

Here's why one hedge fundmanager thinks Alibabacould be a big fraudby Jen Wieczner @jenwieczner SEPTEMBER 18, 2015, 5:42 PM EDT

9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 2/18

Alibaba founder and chairman Jack Ma, founder and chairman of Alibaba Group, speaks at Beijing Normal University onSeptember 16, 2015.

Photograph by ChinaFotoPress via Getty Images

Compared to Amazon and UPS’s figures, Alibaba’snumbers don’t add up, he says.

Alibaba has already had a terrible first year since its IPO: Its shares are down 28%. But onewell-known hedge fund manager has a suspicion that, if true, could potentially destroyAlibaba’s stock completely.

In a post on his blog this week, Bronte Capital hedge fund manager John Hempton laid outreasons why the Chinese e-commerce company’s delivery figures seemed fishy. The possibilitythat Alibaba ( BABA -2.91% ) might be a fraud, he wrote, “is a thesis worth testing”—and plansto gather evidence, and potentially short the stock, depending on what he finds.

Hempton, an Australia-based investor known recently for making a long bet on Herbalife ( HLF -1.06% ) opposite hedge fund manager Bill Ackman’s famous short, said he got the ideafrom fresh-out-of-school candidates whom he interviewed for an entry-level position:

9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 3/18

Here’s how they got that idea, by the numbers:

On Alibaba’s “Singles’ Day” shopping event (“think of it as Black Friday in America,” Hemptonwrote), in November 2014, the company said it received and shipped 278 million orders.That’s 7.5 times more orders than the 37 million orders Amazon ( AMZN -0.09% ) received onCyber Monday.It’s also “more parcels in a single day than Amazon had users [244 million] in a whole year.”Alibaba said its network delivered 8.6 billion packages from its retailers to customers in theyear ended March 31, 2015—or about double the 4.6 billion packages UPS ( UPS -0.64% )delivered in 2014.Alibaba reported about 35,000 total full-time employees as of March 31, 2015. Meanwhile, UPShad more than 12 times as many (435,000) and Amazon had more than four times as many(150,000)—plus robots, Hempton added.Then Hempton did some math: “To truly deliver at a larger intensity than Amazon, Alibaba andits outsource network would need more staff or capital (or both) than Amazon and UPScombined.”Alibaba said that Alipay, the online payment processor it divested in 2011, handled 2.85 milliontransactions per minute at the peak of Singles’ Day.By comparison, “Visa’s ( V 0.70% ) peak transaction volume globally [840,000 transactionsper minute, by Hempton’s calculation] is only about 30 percent of Alipay’s peak minute. Thissuggests a level of shopping in China that puts the US, Europe and most of Asia to shame,”Hempton wrote.

Earlier this week, Alibaba responded publicly to a Barron’s article that expressed a similarskepticism about the “seeming improbability” of some of Alibaba’s reported figures. “Alibabastands by our reported financials and operating metrics,” the company wrote in its response.Alibaba further explained that it is “flawed” to make conventional assumptions about itscustomers’ spending habits because they are a relatively exceptional demographic: “Shoppersthat come to Alibaba’s platforms are early adopters of technology and tend to be urban andmore affluent,” the letter continued. And as for its logistics and delivery staff, Alibaba said thatrather than “taking on large headcount increases ourselves,” it instead “partner[s] with other

[Several] suggested that we could not dismiss the idea that Alibaba was faking theirnumbers. Most people who suggested that knew what an extraordinary (andpotentially outrageously profitable) suggestion it was. After all some two-bit reversemerger Chinese company might be a fraud – but you can only make a limited profitfrom that. The idea that Alibaba – a company with half the market cap of Google ( GOOG 0.73% ) might be making its numbers up is – well – extraordinary.

“

9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 4/18

Licensing

rather than “taking on large headcount increases ourselves,” it instead “partner[s] with othercompanies to leverage their expertise and scale.”

Meanwhile, Hempton (who acknowledged in his post that he’d read Alibaba’s response)concluded his analysis saying: “At this point I know the numbers are wonky.” But before he’llbegin shorting Alibaba, he needs more evidence. As for how to collect that evidence, he’swelcoming suggestions.

49 Comments

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James Malenfant

crazytile

4555joe

Sign in 3 people listening

I would never think of shopping there. So far Ebay is the best. I find the numbers hard to believe as well,and I would dump the stock right now. There is no guarantee on any company that fakes their numbers. Have a great day!

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I have bought things from there.. about 70-85% or so are fake goods. Seriously. Do make some clothing,bags, etc orders and you will see it yourself when you get it. They will sell items or rename similar namesof opther brand goods. Not just clothing's but almost everything you will never imagine. I know whathappens. Many companies (hardware restoration, Apple, clothings companies, and many others) ask thesecompanies to manufacture for them but in the long run... these blue prints or designs, and possibly copiesof the actual item are popping up from everywhere in China and they make the items incredibly so real likethe originals. We were in Florence Italy.. there were tons and tons of bags which we paid $1000s of dollarsselling for under $90-120 Euros. You name it they have it.

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I full agreed my company is listed in Alibaba for more than 12 years, we have never make a sale nor do I

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9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 5/18

3 DAYS AGO

3 DAYS AGO

spfortune

yamfun

know of any one that has buy something in this company. We do received scam letters enquiry mostlyfrom Africa...This company is a fraud and their stock values in not more than $15.00 dollars at best.

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8.6 billion packages!!!! per year and revenue 12.3 billion? that makes $1.43 per package

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2 DAYS AGORussell@spfortune Revenue is not GMV, or Gross Merchandise Volume.

Revenue is their "Take-Rate" Percentage, 2% to 3% off GMV, (think of Take-Rate asmiddleman-commission), so please

DO NOT confuse Revenue with GMV!

Get your numbers (or ducks) lined-up straight, before you shoot-off your precious pearls ofwisdom upon us!!

Besides, since I just gave you the variables, and since you are a genius in simple arithmetic-division, you should be able to (are you?)

figure out GMV.

Then divide GMV total by number of packages you mentioned, and that will be the CORRECT(dear genius) $/package!

Happy calculus, my genius-friend!

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6 HOURS AGOspfortune@Russell @spfortune

Obviously you cannot read straight. Who cares of GMV? The revenue is $1.43 perpackage. This enables one to compare with Amazon or E-bay, their margins andprofit ability.

As to your other 'smart' comments.... it is a matter of civility

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Comparing UBS and Alibaba's headcount shows his ignorance. Alibaba does not deliver themselves,Taobao users pick their 3rd party delivery method. e.g. SF Express, has 240,000 employees. STO has200,000. ZTO has 100,000. YTO has 60,000. Yunda has 50,000....etc

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3 DAYS AGOSamsmith85Exactly. Base of that fact alone, I find that

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9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 6/18

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Seiryu Box

dr_Z

Samsmith85

James Danforth

3 DAYS AGOSamsmith85So ignorant to call Alibaba a fraud without understanding the basics of the company.

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Wasn't "alibaba" become the prince of thieves after thieving from thieves???

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John Hempton obviously knows nothing about China, Chinese consumers much less their absolutedependence upon Alibaba. The numbers are very real and will do only one thing -- grow. LONG BABA.

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What a dumb comparison between Alibaba and UPS workers. Alibaba is a middleman. They do notactually handle and ship packages like UPS.

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in 2013, AMZN had $74 Billion in revenues compared to BABA's $5.5 Billion. Even Amazon's gross Profitof $21 Billion (perhaps more comparable to BABA, given BABA's outsourced structure) still showsAmazon is 4X the size of BABA. Who DO WE believe? Jeff Bezos or Jack Ma. Price Waterhouse gave aclean opinion on BABA's financials. That's Price Waterhouse in Hong Kong, by the way. Not PriceWaterhouse in New York. Given the "outsourced" structure of BABA, PriceWaterhouse cannot audit theentire business, only the Net business received by BABA in its Times Square Office in HK. ( I have been toTimes Square in HK dozens of times.

BABA's Times Square Building is probably 70 stories. But I doubt BABA resides in more than about 10floors. (thats about 3000 people give or take).

in the Madoff Ponzi Scheme, a huge amount of the fraud resulted from Madoff's use of "Feeder Firms" thatwere off the balance sheet of Madoff's company and thus "audit-proof". BABA's outsourced structure isoff-balance sheet too. I find that interesting.

nearly all the shares owned by Ma are held in various entities in the Cayman Islands, British Virgin Islandsand Singapore. These are all well known tax havens for people pushing the limits on their tax planning. SoMa is clearly a guy who is interested in monetizing his BABA shares via bank loan, and clearly is involvedin aggressive tax strategies in known tax havens. Upon going public Ma and Tsui SOLD billions of dollarsof shares in BABA.

in the 3 years leading up to the IPO (11,12,13) 75 million options were exercised. FYI. Then, as we know,Ma and Tsui cashed out a gigantic amount of this.

9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 7/18

4 DAYS AGO

4 DAYS AGO

Shawn Burke

Blake Will

BABA's F-1 essentially describes BABA as a broker receiving commissions.

I have some investment in Amazon. I think Bezos is great. I never touched BABA. BABA and AMZN haveabout the same reported gross cash flow in their latest annual report even though Amazon's gross profit ismore than double BABA's revenues. I find that too good to be true. What really bugs me is why Jack Maneeds to borrow $2 Billion by using his remaining shares as collateral. Does Jack Ma need to make apayment to someone, because from what I see in these small notes above is a guy who has no interest incarrying an investment in the company he built. That's not like Jeff Bezos.

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2015 GDP Growth Rates:

Papua New Guinea19.3 Democratic Republic of the Congo9.2 Turkmenistan9.0 Ethiopia8.6 Myanmar8.3 Côte d'Ivoire7.7Chad7.6 India7.5Qatar7.1China6.8Egypt4.0Taiwan Province of China3.8Israel3.5Poland3.5Korea3.3United Arab Emirates3.2Turkey3.1United States3.1 Singapore3.0Mexico3.0 Saudi Arabia3.0 New Zealand2.9Australia2.8Hong Kong SAR2.8United Kingdom2.7Sweden2.7Canada2.2St.Denmark1.6 Germany1.6Netherlands1.6France1.2 Japan1.0Brazil-1.0Russia-3.8Ukraine-5.5Equatorial Guinea -15.4

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9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 8/18

I have been ATTEMPTING to conduct a business transaction on Alibaba for three months.

The process is slow because of the language barrier and the fact that what most sellers are simplyADVERTISING their capabilities.

In the end if I do end up purchasing (custom auto parts) in my example the transaction will be 100% OFFLINE.

You see once you make contact with a seller - you receive an email and then you are off the Alibabaplatform.

Beyond the financial numbers and metrics -- the Alibaba platform does not work like amazon.

Upon consideration there is no functional or practical way their technology platform could produce ortrack such financial metrics accurately.

It would be like Craigslist -- reporting $600 Billion in annual sales.

Blake

USC Business School

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4 DAYS AGO

4 DAYS AGO

Deep-Throat-IPO

lbp15

@Blake Will

Excellent comparison. Alibaba has the economic value of a CraigsList or a Yellow Pages. Unfortunately for the shareholders, it has an AMZN valuation.

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@Blake Will The Alibaba that you are using to conduct your transaction is not the Alibabathat the consumers in China are using. Alibaba has a network of websites very similar toAmazon that you can just shop and buy on like normal.

As for business transactions like you are speaking of the sellers pay to advertise theri goodsthere and for making contact with customers. Alibaba does not make their money from theactual transaction in such cases.

That said, I have no idea why you are having such troubles with the language barrier. I haveconduct about 50 transactions on Alibaba and complete most deals within a few months TOPS,some as short as a few weeks (if there are only a few customization). I think you maybe do notknow what your doing and this is your first time buying from China.

9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 9/18

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Deep-Throat-IPO

InvestmentCents

InvestmentCents

InvestmentCents

stop crying

That said, I do not doubt for one second that Alibaba difures are skewed. I guarantee you thatthey are. No matter how much you trus ANY business person there, they are ALWAYS lyingabout SOMETHING, I promise you that. It's not always easy to figure what their lying aboutbecause sometimes it is the stupid things but they always do, about SOMETHING.

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2 DAYS AGOJames Townsend@lbp15 @Blake Will

I don't know about the other Alibaba platforms but I have made contact throughthem with Chinese manufacturers on 3 transactions without any issues.

All my contacts can converse in English but they aren't always well versed in thenuance of the English language so there is a bit of a language barrier. Because of thatwe usually estimate about a month to get a complete understanding on who, what,when, where and how much.

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I had posted similar research, and much more, on Laura Logan's CBS News page, as well as my blog,Deep-Throat-IPO.blogspot, beginning nearly a year ago. John Laing is also an avid reader of my blog.

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For the first test- go by something there yourself. Have you ever REALLY tried? See it through- it is ahorrible process and one I assure you that NO ONE DOES WITH REGULARITY. The site itself is a HUGEproblem not a solution.

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Jack Ma raised 80MIL before ONE CENT of revenue was raised. That was his career- raising investmentcapital. It is nothing but a Ponzi.

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Here's a suggestion- take a SAMPLE of seller's profiles on Alibaba. Take 1000 of them. You have thetime. It SAYS HOW MANY TRANSACTIONS THEY CONDUCT. Most of them say they have completed10-20. That is a HIGH average. For Alibaba to be doing the numbers they are claiming- each seller wouldhave to average approximately how many? 10-20 transaction doesn't cut it. It would need to be more like10,000 each. Alibaba DOES NOT MANUFACTURER PRODUCTS- they only broker them. The fraudulentinformation is right there in plain site- everyone is just in denial.

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Don't be too surprised. It is China.

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9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 10/18

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InvestmentCents

InvestmentCents

InvestmentCents

rbarsom

Bruce Baker

paul williams

Marshall_Placid

Alibaba is house of cards being built with a deck that is 49 cards short.

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Jack Ma is an absolute fraud. He even picked the name so that American investors would feel a sense ofcalm subconsciously. Jack is a very common American name - and Ma reminds you of your mother. LOOK UP HIS REAL NAME. THIS MAN IS A CON CON CON.

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The number are FAKE and we have said this for 2 years. We have purchased items "directly from themanufacturers in China" - the items end up being fake and the transactions are invoiced and paid forOUTSIDE OF THE WEBSITE. So, these numbers are not even counting towards Alibaba's bottom line. This happened 4 times and we quit using the site all together. The ONLY thing that protected us and gotus refunds each time- was the fact that we ONLY paid via Paypal. Anyone that believes Alibaba isgenerating revenue to this degree- based upon the word of a con-man that professionally raised funds forhedge fund managers- needs their heads examined.

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Of course they are fake numbers. What, just because the stock trades on the big board means it's not fake? China could care less about our securities laws. Prisons here is like the nicest Holiday Inn ever in China.They simply do not follow the same laws we do and that is to their advantage. The numbers don't add upbecause they are fudged and it takes a short sellers like this Hempton guy to expose the truth. Theregulators should be doing this work but they seem to be busy being used as pawns by the power elite tokeep everything status quo. Why not, they are paid well to keep it that way. Trump is right the Chinese arekilling us. My experience with BABA as a trader also adds to my suspicion. It seems like it is beingartificially propped up.

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I have spent many years trying to do business with various Chinese companies. In the end, it came downto trust and there were just too many hidden facts that prevented a positive result. I would not trust thedata being presented by Alibaba without a forensic accounting by a world class firm.

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Absolute rubbish. This guy must have a sister at Barrons

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Time and time again, posters pointed out that the population of China is 5 to 6 times larger than USA.

Therein lies many problems.

9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 11/18

A larger population doesn't automatically translate into 5 to 6 times the # of transactions, sales volumes,etc.

China's population GDP per capita is $6,807 and USA is $53,041, which is almost 9 times that of China's.

Based on these numbers, USA and China is essentially the same, based on these numbers.

I won't generalize the internet habits or risk adverse behaviours of the Chinese or the Americans.

It's true though that the USA has a much longer period of time to feel comfortable buying things onlinewith credit cards or bank accounts than China has.

You have to remember that any risk adverse person, of whatever country, would loath to give out sensitiveor payment related information in whatever form, even if it is a pay-by-mobile type of service.

So, with everything being equal, the USA should have a SLIGHT edge when comparing USA e-commercecompanies against China e-commerce companies.

However, the article points out that Alibaba's numbers are MUCH (re: 3 times to 10 times larger thanestablished USA e-commerce companies or VISA, etc.) higher.

The point is that the hedge fund manager, to an extent, could be correct, but he needs to do extensive due-diligence before pointing fingers.

Alibaba, if it's cooking the books, is probably doing it conservatively (as in 20% or 30% more) to "grow"steadily in order to curb stockholders' expectations.

I don't think it's flagrantly cooking its books (as in 100% or 200% or Enron type cooking).

However, being China, any evidence that points towards Alibaba actually cooking its books (even thoughit's conservative), will be a large corporate problem for Alibaba and China in general.

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4 DAYS AGOjackyldog13@Marshall_Placid China's population is only about 4.25x that of the USA (info is easilyavailable online), at 6x China would be close to 2B.

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4 DAYS AGOMarshall_Placid@jackyldog13 @Marshall_Placid

9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 12/18

4 DAYS AGO

5 DAYS AGO

DevChoudhury

Wanjun Gao

Quote: "Time and time again, posters pointed out" ... Not me.

In ANY case, the exact number is not the point, because the numbers written in thearticle are very far apart, not just 20% or 30%, etc.

An approximation was used to support my opinions.

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Well, I am not a financial expert but I think this guy has got it wrong.

1. China's population is 6 times the US; makes sense that transaction volumes are 6-7 times more

2. Alipay's transaction volumes match those indicated for BABA

3. Chinese and indeed most of the companies / e-retailers, in India too (where I am from) have a

strong tendency to keep numbers low, headcount low and focus on current profits vs. potential profits.

Thus most of the non-core task, e.g. delivery is outsourced to e-Delivery companies.

4. People need to visit China, India and other new countries in bandwagon of e-commerce to see the real

scale-up plan - delivery and customer satisfaction are key and thus innovative and in-expensive methods

are invented to deliver in even the remote areas.

5. I am more skeptical of Amazon, which has not yielded a profit yet and presses the 'Innovate ?' button to

keep its stock high.

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Where does he get the job as fund manager? I should submit my resume too.

Each of the points are common sense mistakes. How could editor pick this silly blog?

Alibaba is ebay like platform, they don't run inventory, nor delivery shipments. So amazon, ups stories goout of window. That is right, a mistake, so basic.

Nov 11, the craziest ecomm day in China, make it hardly a surprise that peak volume can be generated inshort time. While this "fund manager" conveniently compare apples to oranges.

Whoever has money in this fund, need to get out now.

9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 13/18

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webtelly

gtafunmuscle416

Walter Xu

Cristiano Vinattieri

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Wait, a website that is basically a Craigslist for questionable resellers of goods mass-produced by child andslave labor around the world is suspected of being a fraud? I'm shocked!

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you need to live in china for a few years and experience alibaba first...people in china buy everything ontaobao

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So, in the end he even failed to convince himself, yet is confident enough to share his views on Fortune? Comparing Amazon to BABA is comparing apples with iPads. The business models are different, BABAdoesn't manage physical inventories like Amazon, everything else is taken care of by 3rd party merchants.They are merely a platform for people to trade goods/services.

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Interesting assumptions, but only as speculative as generally assumptions are. BABA's potential existsbeyond his numbers. And the whole Chinese market is a proof of that. The recent Chinese's slow down isunrelevant compared to the level of growth of the developed countries. China's GDP growth 7% vs US 2%or little less than that

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5 DAYS AGO3506Dodge@Cristiano Vinattieri Without any valid data, how can you know any of this?

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5 DAYS AGOCristiano Vinattieri@3506Dodge @Cristiano Vinattieri That is exactly what I said about the HedgeFund's assumption. The only number I am looking at is the Chinese GDP andtransition to consumer economy.

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4 DAYS AGO2BContinued@Cristiano Vinattieri @3506Dodge China's GDP number itself is acooked up statistic. No one in their right mind will believe what theopaque, communist dictatorship spits out.

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4 DAYS AGOCristiano Vinattieri

9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 14/18

5 DAYS AGODSangiovanni

4 DAYS AGOShawn Burke

@2BContinued @Cristiano Vinattieri @3506Dodge If we can'ttrust the Chinese government then let's just look at other companies (likeAAPL) that do business in China. Their sales portray the change in trendof the Chinese population to a consumer economy. Right now it is still atits initial phases and a contraction is preferable to avoid an economicshock. What I'm saying is pick a couple of Chinese stocks you like, andlook at your portfolio in 20yr.

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@Cristiano Vinattieri Everything in China is a house of cards. You know just enough aboutChina and economics to be dangerous! Stable western nations that achieve economic successhave an annual GDP growth rate of 2-3%. That's normal. Event UAE is only growing at a rateof 3.5%. Developing nations in Africa and Asia are seeing growth rates of 6-9%. As theydevelop and grow, that annual growth tapers off and stabilizes. A GDP growth rate of 7-15% isnot normal for a developed nation, nor is it sustainable! The Chinese have been building andproducing - often just for the sake of - to fuel their "growth". Their growth is not sustainable. Also, don't forget that almost 40% of China's population earns less than $1.25 a day!!! So,while they may have over 1 Billion people, nearly half are living below the poverty line($1.25/day).

The only reason that investors and lay people believe the ridiculous China growth phenomenon,is population. As the author point out, just because China has a large population, does notmean that they consume and spend in the same way as Europeans and Americans. Alibaba is atotal fraud, and its been blatantly obvious for quite a while. I've used them myself, and I wasappalled by the unscrupulous vendors and shoddy online infrastructure of the site. It's acomplete joke!

If you believe that China's "slowdown" (which is nothing short of a disaster waiting to happen) is not relevant or serious, then you need to take a macroeconomics class.

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Amazon & Ebay couldn't compete in China against Alibaba. Alibaba won. Alibaba has 35,000 employeeagainst Amazon 15,000. Alibaba doesn't deliver the way Amazon & UPS do, and China is no USA.

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5 DAYS AGO3506Dodge@DSangiovanni Because the Chinese government made sure of it.

2 Like Reply

4 DAYS AGO2BContinued@3506Dodge @DSangiovanni 3506Dodge I agree. The communist governmenthas blatantly rigged the system in Chinese companies favour. But not for long. Thesystem will crumble under it's own fraudulent weight in a few years.

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9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 15/18

5 DAYS AGO

5 DAYS AGO

Alien

Sandeep Mohil

Alibaba faked their numbers when it was listed in Hong Kong decade ago. They bought the shares back ata deep discount from investors. In China, if you are convicted of fraud, it is death sentence. I don't thinkthey will buy back any shares this time if the numbers are found to be fraudulent. US white collar crime istoo lenient. When lock up expires, they will sell everything and go to hiding. Well, you have heard CEOwent on hiding and companies lock their door in the news before, haven't you?

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Not a finance major but doesnt China's huge population(User Base) contribute to this ?

Also the mindset of the people where people of one country are more inclined towards online shoppingthan others.

Not sure why some people have a tendency to put dirt on famous person to get noticed.

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4 DAYS AGOShawn Burke@Sandeep Mohil 40% of their population lives below the poverty line ($1.25/day in China). So I doubt they're online buying electronics and other items. And those that are technicallyabove the poverty line, they aren't any better. The middle class in China is MUCH smaller thanreported.

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9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

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Does the StarbucksRewards Programshortchange customers?COMMENTARY by S. Kumar @skumarus SEPTEMBER 23, 2015, 1:10 PM EDT

Courtesy of Starbucks

The coffee chain offers generous rewards to itscustomers, but the program is not as rewarding as it couldbe.

Earning rewards at coffee giant Starbucks is easy. The company offers a star for each purchasemade through its popular app and automatically generates a reward after a fixed number ofstars. For avid coffee drinkers, it’s an attractive program. There is, however, one feature that Ifeel shortchanges customers — yet few people seem to catch on.

9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

http://fortune.com/2015/09/18/alibaba-faking-numbers-hedge-fund/ 17/18

This is how the program works: each star is awarded based on a single transaction, regardlessof the number of items purchased or the aggregate dollar value. So even if you buy a VentiFrapuccino, a bagel, and four other items for a total of $30, you only receive one star if you payfor everything at the same time. You could have earned the same star just by buying a Tallcoffee for $1.95 instead at New York prices.

The math behind this glitch is easily illustrated by considering a single item such as a 12 oz. bagof ground coffee, which goes for about $12 for simple blends and higher amounts for moreexotic blends. Even though the packet of ground coffee costs six times as much as a Tall cup ofbrewed coffee, you receive just one star. If you had bought six cups instead, you would havereceived six stars. That means by offering only one star for the ground coffee, Starbucks isshortchanging its customers by five stars at least (this number is even higher for moreexpensive ground coffee blends).

How much are these lost stars worth? Under the program, customers who earns 30 stars withina year attains Gold status, which then entitles them to a free beverage or single food item forevery 12 stars earned. Assuming a customer chooses one of the highest priced coffee or fooditems on the menu, usually around $5.65, for his free treat, each star is then worth 47 cents. Sothe 5 stars in the example above can cost a consumer $2.35 in lost rewards.

This computation varies depending on which items a customer buys or picks to receive for free,but even with conservative assumptions, the lost stars could still cost him 80 cents. On theother extreme, customers can lose many more stars than five if they purchase multiple items inone shot. For the $30 purchase mentioned above, for example, the customer is potentiallylosing up to 14 stars, worth anywhere from $2.28 to $6.60 in real money.

There are, of course, workarounds such as asking the barista to ring up each item in a separatetransaction, but this is unrealistic in a busy store and wouldn’t work anyway for a bag of groundcoffee since it’s still one discrete item. So the problem with offering rewards based on thenumber of transactions instead of actual dollars spent still remains.

To be fair, Starbucks ( SBUX ) rewards can still be generous but it depends a lot on what youbuy. If you’re a regular coffee drinker and purchase a dozen cups of coffee, the 13 coffee isfree, which translates to an 8% or higher return on your money. Contrast this with the BalanceRewards program at Duane Reade, a subsidiary of Walgreens ( WAG ), which awardscustomers 10 points for every dollar spent. After 5,000 points, the customer gets a rebate of $5.It’s a seemingly fairer system since it awards points based on the amount you spent but only

th

9/23/2015 Alibaba Numbers Could Be Fake, Bronte Capital Hedge Fund Manager Says - Fortune

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offers you a 1% return on that money.

Given Starbucks’ immense popularity and widespread presence, it’s unlikely that customerswill stop shopping there because of a flaw in its rewards program, but it would be nice if thecompany made some changes to it voluntarily and came up with a better system to correlatethe amount of money consumers spend and the rewards they receive.

S. Kumar is a tech and business commentator. He has worked in technology, media, and telecom

investment banking. He does not own any shares of Starbucks or other companies mentioned in

this article.

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