NEW YORK (TheStreet) -- Kynikos Associates Jim Chanos is short Alibaba (BABA) - Get Report stock and has been vocal about his criticism of the Chinese online and mobile commerce company's business model.
Chanos appeared on Tuesday afternoon's "Fast Money: Halftime Report" on CNBC, where he further discussed Alibaba and his back and forth with the company's vice chairman Joseph Tsai.
The "Halftime Report" panel teased Chanos with comments Tsai made at CNBC's Delivering Alpha conference in September. Tsai rebuked Chanos in his September comments saying he doesn't understand Alibaba's business and even invited Chanos to the company's campus in order to learn more.
"The important thing here is what Joe Tsai said later in response to the question that Jim Cramer and David Faber gave me about why we were bearish. I said you don't see the entire operation of Alibaba. You don't see the actual fulfilment part, even though that's what they do," Chanos said.
He continued by noting further comments from Tsai in which he is said to have asked why Alibaba would want to put the two million people that work in delivery and the warehouses "on the books" when Alibaba is a tech company.
Chanos' point is that his issue centers on the distribution and the unconsolidated accounting. "I would love to put my employees in some unconsolidated affiliate so I wouldn't' have to show their salaries," he said.
"This is an accounting story," Chanos continued. "And again, when you have all the delivery companies and all the warehouse companies that are actually getting the product that I buy from Joe to my house in China, a guy on a bicycle, in a car or whatever, in the warehouse, you don't see any of that. You see a line item, equity net income of affiliates. But there's no idea, with those two million employees of what the costs are, what the accounting is there."
What is known, according to Chanos, is that Alibaba is putting capital into those companies and he believes they're "funding the operating losses."
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate ALIBABA GROUP HLDG as a Hold with a ratings score of C. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive.
You can view the full analysis from the report here: BABA