The financial times came out with a really nasty article about the founders of alibaba, allegedly doing some questionable financial planning we're about to talk about this in this video and what i'll do here, as i do in every video i'm gon na, give you the bottom line. First, i'm also going to give you my unbiased, completely nuanced analysis of what really is going on here. There's not going to be any bashing just because i believe this company is bad or good, or anything like this. It's going to be completely impartial.

Now what we have to talk about this video is what the financial times are, accusing these guys of doing how serious those accusations are. What does it mean for the stock price and, of course, my own personal grandpa jokes, because today my grandpa is going berserk for him. The 4th of july is like a red flag to a bull he's going crazy. You know about american satellites spies all over the place.

We had to lock him down for a few hours just to chill with a bottle of vodka. Now, grandpa aside, let me give you the bottom line. First, according to financial times, what's going on here is very simple, but before i explain it, just one request: don't click, nothing, don't smash, nothing don't buy nothing. Don't click on anything.

Just listen to me give me attention because this is gon na get a little bit complicated, but trust me it's gon na be worthwhile your time. Okay. So, according to the financial times article that just came out jack ma and joe tai, i love their americanized names. They stole my kind of russian, that's name tom nash thing, but okay, whatever, according to this article, these two founders have used their alibaba stock to actually get loans, collateralize these stock against these loans and buy private jets and mentions whatever, without actually selling a single share.

Now, according to this article, they also have never reported this, unlike elon musk, for example, who collateralized half of his that's, not half eddie. I would have half of his tesla stock to actually finance his lifestyle and he had to report it. These guys have used, allegedly, according to this article, some offshore companies and a bunch of corporate structures in order not to report this in the us. Essentially, not letting investors know that that actually happened now before we get to the full analysis.

Let me just give you the bottom line here. I think that the financial times here are talking about something that seems to be more of a compliance issue than anything material. And again you can't confuse me with an alibaba supporter. I don't own alibaba stock.

I don't invest in chinese companies. I can't stand what's going on in china, but in this matter i'm not going to bash this company just because i don't like chinese companies. I think the financial times are right, but i think it's more of a compliance technical issue. Rather than this massive huge issue, i think it's kind of a standard practice as i'll show in this video of massive basically asset, rich cash, poor funders that need some cash, but don't want or can't sell their stock.

It's very straightforward. It's very common! Now what they bought with it sounds cool jet. You know an engine whatever i mean, but it still doesn't really matter. They could have bought a pig farm with it.

I don't give a crap, it doesn't matter. What matters here is that they haven't reported it, which is the thing that this article actually gets right and again, i think investors should know when these things happen, and in this case they were not informed and think that issue is an issue that needs to be Addressed by the sec, if these companies are traded on american stock exchanges, their founders should be under the same guidelines and regulation and restrictions such as guys like elon musk. But again it's not a huge cataclysmic shift event. It's nothing material, i'll, explain in this video! Why? But if you just needed the bottom line here it is, i respect your time, but if you want to stick around and hear my analysis about this because there's a lot of interesting stuff here, i do want you to listen to hang on grab a beer grab.

Some coffee and let's get started so this is the article we're looking at here: alibaba founders, secure loans from global banks backed by company stock, chinese tech, billionaires jack may and joe tai take loans of property, private jets and business deals. So let's read through it a little bit and then i'll give you my analysis: chinese billionaires, jack mine and joe tai have pledged chunks. I don't think they know, otherwise they would have said this in this article interesting. You know this use of semantics is very interesting.

Chunks of their combined 35 billion dollar stake in the e-commerce group alibaba in exchange for significant loans from investment banks. Company documents show the share pledges made to banks, including ubs credit, swiss goldman sachs and others. By the way, if those names seem familiar because a lot of these names appeared in the bill, wang scenario - if you remember me in that story, actually going crazy from my tent in the mountains with no electricity, nothing, so they were undertaking by offshore companies. This is important controlling more than half of the two billionaire stakes in alibaba, which totaled five point: eight percent as of december.

So essentially these two guys owned about six percent in total of the company and i'll explain why this number is actually very important. And obviously, if you want to keep reading the full article, the link is going to be in the description section. I actually advise you do it. I think it's always good to read the full articles before you formulate your opinion, but for this video let me explain the highlights and what really is going on here so essentially, what's the claim? What are the accusations and how big this thing really is, and i'm probably going to have five minutes to explain all of this in a simple, quite easy to understand english, because i don't use this mumbo jumbo.

So, first of all, let's start with some basic terms: what are collateralized loans in one sentence, i'm going to make it quick a collateral loan. Essentially, if you come up to a bank and say hey bank, i need a million dollars, so the bank is going to laugh you out of the door, but if you can come and say hey, i have this farm. I have this car. I have this house which i can put as a collateral.

If i can't pay, you can take my pretty much what's going on with collateral's loans now what they did here, allegedly according to this article, is took a massive amount of loans to buy jets to buy houses. You can read about all the sleazy details in this article, but they allegedly use the alibaba stock to collateralize to get these loans, and at this point some of you may ask well tom: what's the problem it's their assets, it's their shares. They can use it as collateral to get loans from the bank. It's within their prerogative.

It's a free country. Well, if you talk about china, it's somewhat of a free country in the u.s for sure, but in any case it's their stuff. They can do whatever they want with it. Now here's the problem when you're the founder of a company - and you hold a lot of this stock and a lot of this stock is collateralized against loans.

Some nasty stuff can happen, look up bill wang, for example, when you have margin calls, because some stuff happened, that you didn't plan and you get margin called into oblivion. A lot of these shares will get dumped into the market by the banks hurting the share price. Like you've never seen before, causing a cascade and time collapse, it's going to be insane and that will hurt the other shareholders. So essentially, when you collateralize stock against loans - and you hold a lot of it - it creates a massive risk for the other shareholders of the company, and for that purpose we have reporting essentially requiring people to report when they do it.

That is why elon who holds about 20 of tesla reported that he took about 10 and collateralized against cash. I mean he needs to pay for the private jets and whatnot right, it's fair. At least we know. So when you invest in tesla, you make an actual decision to invest, despite that in this article, they're, claiming that jack and joe, the founders of alibaba did not disclose that they use offshore companies that hold the stock, and this thing was never disclosed, allegedly in the United states preventing this information from the shareholders, but in this case we have to turn to the sec and the regulators to actually force these chinese companies that actually trade on u.s stock exchanges do it for sure.

But is it really a huge deal, a cataclysmic event? A fraud event, i don't think so now a lot of respect to the financial times, one of my favorite outlets. In fact, if you can't remember the financial times, took a lot of hit for the wire card story, they got sued, they got attacked so much dirt. Were thrown on the financial times during the wire card stories that they did, eventually, they turned out to be right and wire card was a massive sham, so the financial dives have great credit and history with exposing nasty behavior. So a lot of respect for them.

However, in this case, i think that this is more on the compliance side of issue rather than this material fraud like we had in wire card allegedly and again, it's just my opinion. It might be inaccurate might be wrong. It might be the ramblings of amendment, you never know you got ta, do your own research, but here's my theory about this. This isn't anything unique.

So why do shareholders? Do it especially founders? It's kind of a common thing, because, when you're the founder of a massive company you're stuck in the golden cage, you have so much of these shares, but you can't really sell any for multitude of reasons. For example, tax events - you probably have zero cost based on this, so it means you're going to pay capital gains on the entire amount. Also you're going to be losing control of your company, also you're, going to be freaking out other people to sell, because now the founder is selling look at palantir, for example, that guy is not even selling he's just actually exercising options, but i mean it causes a Massive panic event there's a lot of other stuff that happens when you sell shares as the founder. Now.

Here's the solution for you and actually that's the one elon used take these shares, get a loan from the bank, keep the shares, pay interest and just live off. That cash, without triggering any of these negative events, the banks, will happily extend you the loan for as much as you need, 10 years, 15 years 20 years, whatever, as long as you keep paying interest and if that interest is reasonable, why not? In any case, you would have paid much higher capital gains tax if you just sold the stock into cash. So the interest is a win-win for the client and the bank. It's a very lucrative business for banks.

You would not believe the numbers and it's insanely common practice, every founder, that is cash, poor and asset rich, is stuck in the same place, and they all do this as a massive planning to actually have jets and mentions - and you know whatever it is they're paying For, in fact, if anything, it shows confidence in the company, because, when you actually hold on to your shares and you're paying money to the bank in the form of interest just to keep holding on to these shares, it shows that you have faith in these shares. You think they're going to be worth more. Another thing is: if you actually sold them. That means you think they're not going to go up anymore.

So, in fact, if anything, it shows that these founders think that these shares will actually go up and there's going to be more appreciation which they don't want to give up on now in case of vlan, for example, the concerns of causing this massive cascade event. In case of a margin, call they're actually legitimate, but just look at the numbers here: jack and joe combined hold six percent, not even six five point: eight percent of alibaba. What kind of a cascade is this thing going to create a six percent holding this thing? Is gon na be over by russian christmas? I mean what is this? This is just insane, so six percent isn't nothing to worry about. I do agree, there's a massive compliance issue here that needs to be addressed, but if it's just a six percent holding, they don't even qualify for that illness kind of type of event where they sell and it causes massive panic.

It's not really that case here. I'm no alibaba fan. I don't have any position in this company. I don't invest in chinese companies out of principle.

I think those are by definition, bad investments because of what's going on in china, so i can't be mistaken for a fan of chinese companies or alibaba, but i'm not going to sit here and say that this is a huge deal. If i don't think it is, i think that the financial times got it right, but i think the way they frame the story, it's not as big of a deal as they present it. To be it's a compliance issue that needs to be addressed more on the structural level of how chinese companies report in the us. But it's not a huge deal, we're talking about two guys who are doing the same thing.

Every other founder is doing. They only hold about six percent of the entire stock. It's not a huge deal, as always a huge shout out for the channel members and the patrons for making this possible. Let me know if you agree or disagree with me in the comments.

I'd love to read it i'll, see you guys in the next video.