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Greenberg: Warning Bells at MercadoLibre

By: Herb Greenberg | 09/12/13 - 01:33 PM EDT

Chief Financial Officer Pedro Arnt replied that the company doesn't "have a number here on what the alternative reporting would be, simply because that's an illegal currency rate." He went on to suggest that analysts do their own work, especially in Venezuela, where he said, "It should be fairly easy to back out the numbers." (This is exactly what Roberts has done.)

When I asked it, a spokesperson replied:

"Our reported financial statements are prepared under U.S. GAAP standards, and are reviewed by our local and regional auditors. These financial statements expose our financial results in accordance with the same accounting practices applied by other U.S. GAAP filers who operate subsidiaries in the same countries as us, and are consistent with our previous quarterly financial statements.

"Our reported financial statements for the second quarter of 2013 are a precise accounting exposition of the strong financial results delivered by MercadoLibre, and its subsidiaries. As reported, during the second quarter of 2013, units sold through MercadoLibre grew by 27% versus the prior year, revenues grew by 26% in US dollars, and net income in U.S. dollars grew by 18%, despite currency headwinds in most of our markets."

"Furthermore, we do not comment on conjectural interpretations of our financial results. We are confident that capital markets, the investment community, individual investors and regulators have a solid understanding of our business and its results."

What about Galperin's stock sales? The company did not acknowledge or answer my question -- even after I asked about it again immediately after receiving the above comments.

While the company says it is "confident" investors "have a solid understanding of our business and its results," some analysts appear to disagree.

In a post-earnings note, Sandler of Deutsche Bank -- the analyst who asked how the company's results would be if it accounted for forex differently -- wrote:

"Meli's financials are becoming increasingly opaque given the hyperinflation impact on growth rates."

J.P. Morgan's Marcelo Santos downgraded the stock to Neutral, as well, saying, "We believe current valuation reflects well the balance of substantial growth opportunities in LatAm e-commerce with risks associated to currency devaluation, increase in competition and economic weakness in the region."

Roberts, meanwhile, continues to believe the company's growth is unsustainable. "Like taking drugs, inflation feels really good until it doesn't," he says.

Reality: For investors, this is the ultimate game of stock-market roulette.

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Herb Greenberg, editor of Herb Greenberg's Reality Check, is a contributor to CNBC. He does not own shares, short or trade shares in an individual corporate security.

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