Alibaba Group Holding Ltd is in the bad books of Jim Chanos. Chanos was one of the first traders to short sell Enron, arguing that its accounting practices overstated earnings. Enron, the darling of Wall Street, finally fell in 2001.
The well-known short seller and billionaire is now betting heavily on the downfall of Alibaba stock. Chanos has been trashing Alibaba stock for “questionable” accounting practices in recent weeks, while his fund, Kynikos Associates, has taken a short position on Alibaba’s shares.
In May 2016, Chanos told Fortune magazine, “The accounting at Alibaba is some of the most questionable I have ever seen for a major multi-billion market cap company that went public (in the USA).”
Chanos describes his investment strategy as being based on “intensive research into stocks” looking for fundamental and large market failures in valuation, typically based on underestimated or previously unreported failings in the business or market of a stock. He follows this research by committing to a (usually large) short-position which he is willing to hold for long period of time. Because of this model, his investments function more like those of a whistle-blower than most typical investments.
Chanos has been called the “King of Shorting” after his predictions about Enron came true while making him a very wealthy man. You would expect a lot of other fund managers to keep away from Alibaba stock now that Chanos is bearish on the company, but not if you are Singapore’s sovereign wealth funds.
Reuters reported on 1 June that Singapore sovereign wealth funds bought “$1 billion of Chinese e-commerce company Alibaba Group’s shares as part of an $8.9 billion sale by Japan’s SoftBank, Alibaba‘s biggest shareholderSingapore’s GIC Private and Temasek Holdings each purchased $500 million of Alibaba shares at $74 apiece through subsidiaries, Alibaba said, offering details of the SoftBank sale announced on Tuesday.”
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