Concerns growing over corporate transparency after SEC investigation
Alibaba Group Holding reported impressive results for its second fiscal quarter on Wednesday, with revenue and sales both gaining strongly.
Net income in the quarter ended September 30, 2016 was 12.95 billion yuan ($1.94 billion), up 41 percent year-on-year.
Despite the eye-popping growth, some investors questioned whether the Chinese e-commerce giant's performance can be sustained, as the domestic economy is still plagued with many uncertainties and the company is being investigated in the U.S. for its accounting practices.
In the second fiscal quarter, Alibaba posted revenue of around 34.29 billion yuan, up 55 percent.
Non-GAAP diluted earnings per share (EPS) was 5.26 yuan, compared with 3.61 yuan a year earlier.
The online retail giant's financial results are in a reasonable range as the group's e-commerce business is still on the rise thanks to China's large population of online shoppers, Li Yi, a Shanghai-based independent IT expert, told the Global Times on Wednesday.
The company's other businesses such as digital media and cloud computing also contributed to its growth, Li noted. The company's cloud computing division reported an increase in revenue of 130 percent year-on-year to about 1.5 billion yuan. Its digital media and entertainment posted growth of 302 percent to 3.6 billion yuan.
Analysts had estimated Alibaba's second-quarter revenue rose 40 percent year-on-year to the equivalent of $5 billion, with EPS of 69 cents, up 20 percent year-on-year, wallstreetcn.com reported on Wednesday.
However, short-sellers have been circling Alibaba for a while. Short-sellers involve investors selling shares they don't own. They believe that the price will fall, enabling them to buy it back at a lower price to make a profit.
Ahead of the upcoming Double 11 festival, also known as Singles' Day, a key blockbuster for Alibaba, the company's short interest, or shares sold short, has surged 49 percent, equivalent to an increase of $3.9 billion, according to data from New York-based financial analyst firm S3 Partners. As of the end of September, the volume of transactions completed by short-sellers reached $12.9 billion, the data showed.
In contrast to some investors' sliding confidence, the company's share price stood at $101.15 on Wednesday's close, a 30 percent increase since May 2015.
Short-sellers are reacting to uncertainties over China's macroeconomic environment, a key determinant for Alibaba's financial performance, Liu Dingding, an independent analyst, told the Global Times on Wednesday.
For example, while Wedbush Securities' investor advisor Gil Luria has a "hold" rating on Alibaba, he has also suggested investors sell the shares, as he doesn't forecast China's economy to sustain the same robust growth as in the past.
Concerns have also been growing over Alibaba's corporate transparency.
In May, the U.S. Securities and Exchange Commission (SEC) started an investigation into Alibaba's accounting practices with help from one or more "high-level" whistleblowers, the New York Post reported on Wednesday, citing a source close to the situation.
The SEC was looking into the transactions of its Cainiao logistics arm and the sales figure for Singles' Day last year, said the report. Some investors such as Jim Chanos have claimed that Cainiao is being used to hide losses on Alibaba's balance sheet.
Analysts said that if Chanos is right, the delivery segment, which is a vital part of the e-commerce platform's business expansion, will suffer a blow in the near future.
In response, Alibaba said that "the truth is going to come out," according to a statement the company sent to the Global Times on Wednesday. The company already submitted relevant documents to the SEC voluntarily in May, it said, and it "reserves the legal right" to respond to competitors' malicious activities.
Alibaba said in October that sales from this year's Singles' Day festival are expected to surpass the number in 2015. Last year, the company recorded 91.2 billion yuan in transactions on Singles' Day, up 60 percent year-on-year.
The leading e-commerce platform has rolled out various promotions, including virtual reality shopping malls, to boost this year's sales. It also plans to extend goods sales to destinations beyond the market in the Chinese mainland, such as Hong Kong.
