5 ms·

In short, pretty bizarre financial engineering going on with Chinese industrial companies buying western gaming start-ups for enormous sums in order to buttress

In short, pretty bizarre financial engineering going on with Chinese industrial companies buying western gaming start-ups for enormous sums in order to buttress their (chinese) own bottom line and keep the shares going up on the Chinese stock market. This is a type of pyramid scheme that is bound to come crashing down at some point, and bankrupt every single one of these companies.

forkLding 9y ago
Not entirely, if you make more net income and profits at the end of the day and can take the debt burden, can you die as a company? At the end of the day, lots of companies acquire for a range of reasons, some companies acquire other companies so that they can move to an area which is tax-free. I think its too early to tell, especially in the world of business which doesn't follow rigid rules.
sushid 9y ago
Why couldn't these companies issue more shares in secondary offerings at 100x their PE ratio, hoard all the cash, and wait for the crash to do a buyback? Seems like a good way to hedge against a downturn. Of course, per usual, retail investors will lose out as usual, but the companies could end up just fine.
- alnitak 9y ago
  How did you get to know all those things you're talking about? Where does one even start decrypting finance jargon and "possibilities"?
  - metaphorm 9y ago
    start with https://academy.investopedia.com/ https://academy.investopedia.com/? helpful for jargon anyway.
  - semi-extrinsic 9y ago
    Obligatory: http://abstrusegoose.com/389 http://abstrusegoose.com/389
  - frgtpsswrdlame 9y ago
    If you're serious about getting to know it, I would torrent some level 1 CFA study material and skim it in bits and pieces. Really though, I would avoid it. This jargon can rot your brain.
    - Chris2048 9y ago
      Doesn't CFA contain lots of law/ethics etc?
      - frgtpsswrdlame 9y ago
        15% I think but you can skip that.
  - sushid 9y ago
    Honestly, most of the "jargon" I know is mostly by reading the news. I guess I know a bit more than the typical layperson but that's because I do a little bit of personal investing outside of Robinhood and most of my friends not in tech are in finance.
  - lmm 9y ago
    Read Matt Levine's column on Bloomberg. All of them, and the ones from when he worked for Dealbreaker as well. He tells the stories in a clear way that makes sense, cutting through a lot of nonsense, and so you understand the key points even without getting the jargon, and then you gradually pick up the jargon too.
    - eru 9y ago
      Matt Levine's column is great. The Economist can also bring similar-ish knowledge, but its focus is broader.
  - zhte415 9y ago
    Read macro-man.blogspot.com if you really fancy some fancy terms. In seriousness, after reading for a couple of months, and looking the odd thing up, and not worrying about the jargon, just acquire it, you'll have a seriously good understanding of markets, what they influence, and what influences them.
  - mpeg 9y ago
    Play Capitalism 2 / Lab and you're half way there
- simonh 9y ago
  It doesn't work like that in China though. No company management over there is going to let a large amount of capital sit in a bank unused.
- supremesaboteur 9y ago
  Are you asking a company to short it's own stock ?
  - eru 9y ago
    Isn't that what an IPO is? Or any kind of share offering?
callmeed 9y ago
Exactly why I wont touch Alibaba stock. Too much risk that something like this could be happening.
ThrustVectoring 9y ago
It reads to me as pretty much entirely an end-run around Chinese capital controls. Chinese investors can't just go and buy US assets, but they can buy Chinese companies that have engineered a purchase of US assets. This is the fundamental driving force for the price difference. Expect a lot of these companies to take a bath if/when capital controls get eased.
prklmn 9y ago
This article gives some great insight. Basically lots of these companies are in debt up their eyeballs so they can afford to make moves like this to bring real cash in. As anyone could imagine, it's not all that rosy https://www.bloomberg.com/news/articles/2017-04-24/china-s-hidden-debt-stirs-investor-angst-as-local-defaults-rise https://www.bloomberg.com/news/articles/2017-04-24/china-s-h...

forkLding 9y ago

Not entirely, if you make more net income and profits at the end of the day and can take the debt burden, can you die as a company? At the end of the day, lots of companies acquire for a range of reasons, some companies acquire other companies so that they can move to an area which is tax-free. I think its too early to tell, especially in the world of business which doesn't follow rigid rules.

sushid 9y ago

Why couldn't these companies issue more shares in secondary offerings at 100x their PE ratio, hoard all the cash, and wait for the crash to do a buyback? Seems like a good way to hedge against a downturn. Of course, per usual, retail investors will lose out as usual, but the companies could end up just fine.

alnitak 9y ago
How did you get to know all those things you're talking about? Where does one even start decrypting finance jargon and "possibilities"?
- metaphorm 9y ago
  start with https://academy.investopedia.com/ https://academy.investopedia.com/? helpful for jargon anyway.
- semi-extrinsic 9y ago
  Obligatory: http://abstrusegoose.com/389 http://abstrusegoose.com/389
- frgtpsswrdlame 9y ago
  If you're serious about getting to know it, I would torrent some level 1 CFA study material and skim it in bits and pieces. Really though, I would avoid it. This jargon can rot your brain.
  - Chris2048 9y ago
    Doesn't CFA contain lots of law/ethics etc?
    - frgtpsswrdlame 9y ago
      15% I think but you can skip that.
- sushid 9y ago
  Honestly, most of the "jargon" I know is mostly by reading the news. I guess I know a bit more than the typical layperson but that's because I do a little bit of personal investing outside of Robinhood and most of my friends not in tech are in finance.
- lmm 9y ago
  Read Matt Levine's column on Bloomberg. All of them, and the ones from when he worked for Dealbreaker as well. He tells the stories in a clear way that makes sense, cutting through a lot of nonsense, and so you understand the key points even without getting the jargon, and then you gradually pick up the jargon too.
  - eru 9y ago
    Matt Levine's column is great. The Economist can also bring similar-ish knowledge, but its focus is broader.
- zhte415 9y ago
  Read macro-man.blogspot.com if you really fancy some fancy terms. In seriousness, after reading for a couple of months, and looking the odd thing up, and not worrying about the jargon, just acquire it, you'll have a seriously good understanding of markets, what they influence, and what influences them.
- mpeg 9y ago
  Play Capitalism 2 / Lab and you're half way there
simonh 9y ago
It doesn't work like that in China though. No company management over there is going to let a large amount of capital sit in a bank unused.
supremesaboteur 9y ago
Are you asking a company to short it's own stock ?
- eru 9y ago
  Isn't that what an IPO is? Or any kind of share offering?

callmeed 9y ago

Exactly why I wont touch Alibaba stock. Too much risk that something like this could be happening.

ThrustVectoring 9y ago

It reads to me as pretty much entirely an end-run around Chinese capital controls. Chinese investors can't just go and buy US assets, but they can buy Chinese companies that have engineered a purchase of US assets. This is the fundamental driving force for the price difference. Expect a lot of these companies to take a bath if/when capital controls get eased.

prklmn 9y ago

This article gives some great insight. Basically lots of these companies are in debt up their eyeballs so they can afford to make moves like this to bring real cash in. As anyone could imagine, it's not all that rosy https://www.bloomberg.com/news/articles/2017-04-24/china-s-hidden-debt-stirs-investor-angst-as-local-defaults-rise https://www.bloomberg.com/news/articles/2017-04-24/china-s-h...