{
  "docId": "019dd923-622c-750b-8b96-aa4b5c012f2a",
  "docSlug": "aa7e6c3950ac",
  "documentTitle": "TAL Education Group (TAL)",
  "authorId": "51_Muddy_Waters",
  "authorName": "Carson C. Block",
  "documentKindSlug": "research-note",
  "documentKindLabel": "Research note",
  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2018-06-13 00:00:00",
  "orientation": "portrait",
  "aspectRatio": 0.77272725,
  "pageNumber": 31,
  "pageCount": 71,
  "prevPage": 30,
  "nextPage": 32,
  "slideType": "expose_contradiction",
  "function": "expose_contradiction",
  "density": "overcrowded",
  "nDataPoints": 5,
  "notes": "The slide is a research note exposing potential financial fraud. It uses strong, accusatory language ('abusive', 'fraudulent', 'sham').",
  "elementsJson": [
    "headline_text",
    "paragraph",
    "callout_box"
  ],
  "metadataConfidence": 1,
  "imagePath": null,
  "slideHref": "/slides/019dd923-622c-750b-8b96-aa4b5c012f2a/31",
  "deckHref": "/decks/019dd923-622c-750b-8b96-aa4b5c012f2a",
  "deckJsonHref": "/decks/019dd923-622c-750b-8b96-aa4b5c012f2a.json",
  "deckAnchorHref": "/decks/019dd923-622c-750b-8b96-aa4b5c012f2a#slide-31",
  "components": [
    {
      "bbox": null,
      "kind": "callout",
      "text": "We conclude that this claimed transaction fraudulently inflated pre-tax profits by up to $59.4 million from FY2016 through FY2018.",
      "attrs": null,
      "subkind": null,
      "toolName": "Visual emphasis",
      "toolSlug": "visual-emphasis",
      "confidence": null,
      "componentId": "019dd953-25b2-736e-8e67-fb5b702180c0",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": null,
      "kind": "metric",
      "text": "pre-tax profit: $60 Million",
      "attrs": null,
      "subkind": "primary",
      "toolName": "Quantification",
      "toolSlug": "quantification",
      "confidence": null,
      "componentId": "019dd953-25b2-736e-8e67-ff41b278514b",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.12,
        "w": 0.76,
        "x": 0.12,
        "y": 0.69
      },
      "kind": "paragraph",
      "text": "Only 15 months later, TAL claimed to have allowed “the buyer” to return the business... We suspect substantially all of this deferred revenue fell to the pre-tax income line. Moreover, we believe most – if not all – of this deferred revenue was fraudulent.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "04bb44ac-7105-4518-a663-dbec466f78af",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.08,
        "w": 0.76,
        "x": 0.12,
        "y": 0.82
      },
      "kind": "paragraph",
      "text": "We see it as obvious that TAL always intended to take the business back... Scratching the surface, though, reveals an extraordinary set of facts – facts that cause us to believe that each purported transfer of the business was a complete sham.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "0706f66b-102b-48c7-bb00-b3c0754f365c",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.12,
        "w": 0.76,
        "x": 0.12,
        "y": 0.33
      },
      "kind": "paragraph",
      "text": "After acquiring DFRL in 2011, TAL set the company up as one of its VIEs... There are legitimate reasons why a company would cancel its VIE agreement, but parking the business to generate fraudulent profits is clearly not one of them.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "194d7d54-20c2-4de3-82fd-64265b071069",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.15,
        "w": 0.76,
        "x": 0.12,
        "y": 0.17
      },
      "kind": "paragraph",
      "text": "We and many others have been warning for years about the risks to U.S. investors of the VIE structures common in China companies... By roundtripping DFRL, TAL now joins the ignominious list of VIE abusers.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "5b125efa-38fb-42e5-adab-f69538e9eba8",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.15,
        "w": 0.76,
        "x": 0.12,
        "y": 0.53
      },
      "kind": "paragraph",
      "text": "TAL’s Guangzhou One-on-One transactions were so egregious that “asset parking” would be a kind description... We conclude that this claimed transaction fraudulently inflated pre-tax profits by up to $59.4 million from FY2016 through FY2018.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "6916b88a-e8bf-4360-ba55-71d47d6cea6c",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.05,
        "w": 0.76,
        "x": 0.12,
        "y": 0.47
      },
      "kind": "title",
      "text": "Transaction 2 – Guangzhou One-on-One (GZ 1-1) – Asset Parking Leading to Estimated Improper Pre-Tax Profit Inflation of Approximately $60 Million",
      "attrs": null,
      "subkind": "headline",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "6123f813-3b44-4e7f-bc30-6161dadec9c2",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.05,
        "w": 0.76,
        "x": 0.12,
        "y": 0.11
      },
      "kind": "title",
      "text": "What’s Mine is Mine, What’s Yours is Mine: DFRL Joins the List of Abusive VIE Transactions",
      "attrs": null,
      "subkind": "headline",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "f31d304e-c574-4a4d-abce-f5a8e9f9723f",
      "frameworkName": null,
      "frameworkSlug": null
    }
  ],
  "metrics": [],
  "tools": [],
  "frameworks": [
    {
      "name": "fraud-exposure",
      "slug": null,
      "matchId": "b2178650-246f-494f-ba91-fadc4741f57c",
      "evidence": "The slide systematically outlines alleged accounting irregularities and 'sham' transactions to expose financial fraud.",
      "confidence": 0.9
    }
  ],
  "arcBeats": [
    {
      "to": 71,
      "from": 3,
      "beatId": "9de0976e-28e1-420f-a107-b337349d49c9",
      "arcName": "Problem-Agitate-Solution",
      "arcSlug": "problem-agitate-solution",
      "beatName": "Expose Contradiction",
      "beatSlug": null,
      "evidence": "The document is primarily composed of slides that expose contradictions in TAL Education's financial reports",
      "position": 0,
      "confidence": 0.8,
      "parentBeatName": null,
      "parentBeatSlug": null
    },
    {
      "to": 71,
      "from": 24,
      "beatId": "f1a1059e-e779-4948-a18b-bd7e979146da",
      "arcName": "Problem-Agitate-Solution",
      "arcSlug": "problem-agitate-solution",
      "beatName": "Appendix Data",
      "beatSlug": null,
      "evidence": "The document includes extensive data and financial reports to support its claims",
      "position": 2,
      "confidence": 0.8,
      "parentBeatName": null,
      "parentBeatSlug": null
    }
  ],
  "loops": [
    {
      "to": 71,
      "from": 2,
      "name": "Cost Of Inaction",
      "slug": "27-cost-of-inaction",
      "bestFor": "Urgent budget requests, compliance, risk mitigation",
      "matchId": "173d833e-f506-46f1-a81b-f0c40e490cd2",
      "evidence": "The document implies that investors who fail to address these discrepancies may suffer significant financial losses",
      "position": 2,
      "objective": "What is the cost of not addressing TAL Education's financial discrepancies?",
      "structure": "The Status Quo -> The Hidden Costs Accumulating -> The Future State of Inaction -> The Tipping Point",
      "confidence": 0.6,
      "description": "Quantify what happens if the audience does nothing"
    }
  ],
  "imagePathAlt": null,
  "thumbSrc": null,
  "thumbSrcAlt": null,
  "locked": true
}