Alibaba Accounting Issue Is a Nonevent

 | Aug 15, 2014 | 1:38 PM EDT  | Comments
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Overnight, news broke that Alibaba found some accounting issues in one of its units, and trading was halted in its shares.

Almost immediately, it seemed like the Western media picked up on this story, suggesting that this would negatively impact the upcoming Alibaba IPO road show.

It won't. This is a nonevent. Here's why.

Alibaba went on a shopping spree in 2014. The company seems to have been caught off guard by the rapid success of WeChat in China and was scared by it. Alibaba's response seems to have been to diversify into lots of different businesses so that its reach is unquestionable.

The company has literally bought or invested in dozens of businesses this year.

One of them was ChinaVision, a filmmaker and content producer that has since been renamed Alibaba Pictures. That's the unit within which the parent company disclosed its accounting problems last night.

If you buy tens and tens of Chinese companies in a short amount of time, it doesn't surprise me at all that one of them had accounting issues. We're only hearing about this now because Alibaba is going through a big IPO and wants to make sure that all its t's are crossed and i's are dotted. If it had been some other big company that had bought this division, the problems would have likely been masked inside it.

The Western media likes a good story until it's been talked about so long that they want to write about why the good story is bad -- or why the good story needs a comeuppance. That's exactly what is happening here now when they write things about if this is the tip of the iceberg of accounting issues with all of Alibaba.

To me, this is a story that's forgotten about in 36 hours. It's certainly not going to be discussed after this coming weekend.

By the time the roadshow kicks off in a couple of weeks for the Alibaba IPO, I doubt anyone even mentions this issue.

So, no, this new revelation will have no impact on the pending pricing of Alibaba's stock in its IPO.

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