Subject: OT: Alibaba
I am just noting that EVBigMacMeal has left a very good post on the Alibaba board:
https://www.shrewdm.com/MB?pid...

A key criticism (quoted):
Share based compensation. The focus on free cashflow is standard practice among tech firms. Alphabet is just the same. But that doesn’t make it right. I read the note on share based compensation and was lost and switched off. I know SBC is a big clip that must be taken into account after free cashflow. It explains the huge difference in the PE ratio based on earnings (excluding gains/losses on investments) and the FCF multiple which appears ridiculously low. How do they calculate the P&L SBC expense and how does it develop over time? I don’t view SBC as some, one off bonus for management excellence. It is more likely, as Buffett explained years ago (when it didn’t even go through the P&L) a normal cost of doing business. Alibaba can’t recruit, retain and motivate employees without paying them with equity in the business. I respect the employees in any tech firm demanding market rate compensation. But I do object to Alibaba and the standard practice of issuing shares out of thin air and then buying them back in the market with shareholder’s CASH, which keeps the share count from increasing too much and then asking me to focus on free cashflow. As I say, it’s standard practice in most firms but it looks like a big material number at Alibaba that I don’t have a handle on. For now, I will assume Alibaba is really around 9 or 10 times enterprise value.

(Continue on the Alibaba board)

- Manlobbi