*Update – We believe that 58.com (WUBA) is a House of Cards with Little Economic Substance

*WUBA UPDATE – 4-29-2020 – Read Here

Read the Full Report Here

  • Our extensive due diligence, accounting analysis, and review of Chinese SAIC filings suggests to us that WUBA is an accounting house of cards with little economic substance.
  •  We believe that WUBA has failed to disclose that its biggest acquisition Ganji, acquired for $2.8bn, has seen its revenue plummet by over 95% since the acquisition by WUBA.
  • Our web traffic analysis supports our opinion that Ganji is a failing business. Yet, Ganji is still touted as one of WUBA’s core assets.
  • Assets related to Ganji currently make up $2.1bn or over 50% of WUBA’s shareholder equity and we believe should be impaired in light of our findings. We call on the company’s auditor PWC Zhongtian and regulators to look into the questions and issues we outline in this report.
  • SAIC filings suggest that WUBA has been inflating the financials it reports to the SEC.
  • Revenues in the last three years for the overall company are overstated by a cumulative RMB 4.6 billion.
  • We also see a pattern where the best businesses are spun off at deflated prices to insiders, and less successful business segments are kept in the public company and dressed up to make the financials appear better.
  • WUBA spun off its peer-to-peer car sales platform Guazi to its former Co-Chairman for effectively no consideration – our analysis suggests to us that WUBA effectively gifted its former Co-Chairman over $ 1.7 billion.
  • WUBA spun-off its online finance business to its CEO in an arcane deal that seemed to be aimed at enriching insiders at the cost of public shareholders.
  • Our accounting analysis of SEC filings shows that the company employs what we believe to be many accounting shenanigans that seem to be aimed at dressing up SEC financials. WUBA seems to try to avoid consolidating entities whose financials do not look favorable.
  • Our fundamental analysis of WUBA shows that the company’s core business is facing numerous headwinds, including an unfavorable environment for housing and job market. These issues are only emphasized by the recent health crisis in China.
  • While WUBA raises money from US shareholders on the back of what we believe to be fraudulent financials, insiders at the company are getting rich.

 

Read the Full Report Here

 

*WUBA UPDATE – 4-29-2020 – Read Here

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Grizzly Research LLC is focused on producing differentiated research insights on publicly traded companies through in-depth due diligence.