Alibaba's accounting woes won't derail IPO train
Alibaba Pictures Group, which is 60 percent owned by the company, announces a delay in its first-half earnings report.
The revelation that a company Alibaba has purchased a stake in now has accounting irregularities isn't likely to delay its initial public offering, slated to happen later this year, according to investors.
"I think this is a 36-hour story," Ironfire Capital co-founder Eric Jackson said in an email. "By the time the roadshow starts, it will be forgotten."
Jackson, a long-time Yahoo shareholder, has recently pushed for Yahoo to be acquired by Alibaba or Japanese conglomerate Softbank.
A division of Alibaba Group, Alibaba Pictures Group said it would delay its first-half earnings report after the company found accounting irregularities. The irregularities occurred prior to the 60 percent stake Alibaba took in the company, previously named ChinaVision Media Group. Alibaba spent $805 million for the stake earlier this year, amid several other acquisitions.
Alibaba, which is partially owned by Yahoo (YHOO), recently purchased AutoNavi, a company that provides digital map content and navigation and location-based solutions in China. In addition to the aforementioned Alibaba Pictures, Alibaba has acquired stakes in Youku Toudou (YOKU), Intime Retail, Singapore Post and Guangzhou Evergrande, a soccer team which Alibaba founder Jack Ma said he spent talking to the team's over for 15 minutes over drinks.
"I don't think it's a big deal," said one hedge fund analyst who declined to be named. "I need to look more closely at what the issue is but unless it was outright fraud, [it's] probably not a big deal. Studio accounting is kind of complicated and filled with assumptions."
When Alibaba purchased the stake in Alibaba Pictures, it shuffled the management team, bringing in its Chief Risk Officer, Shao Xiaofeng, replacing Chairman Dong Ping, a producer who has produced films such as "Crouching Tiger, Hidden Dragon," "Journey to the West," "Dada's Dance," and others, according to IMDB.com, a film and television database website.
China has been wrought with accounting issues over the years, with Alibaba Pictures Group being the latest. "It doesn't affect my views on the parent," Jackson said. "They went on a buying spree in China. They were bound to grab some companies with accounting issues."
Alibaba recently restructured its deal with Alipay, ahead of the company's long-awaited initial public offering in an effort to limit its exposure to financial services, but potentially receive a larger pie of fees from those businesses.
The IPO has largely been rumored to take place in early September, with the roadshow happening after the U.S. Labor Day holiday. Alibaba's offering could be the largest tech offering in history, surpassing Facebook's (FB) IPO in 2012, which raised more than $18 billion.
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Despite its size, the IPO will create just two new members of the 10-figure club from its executive ranks. A few others could net hundreds of millions.
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