Alibaba's big lockup expiration to test faithful
John Shinal, Special for USA TODAY11:19 a.m. EDT March 9, 2015
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SAN FRANCISCO — If you thought Alibaba's $25 billion initial public offering last September was a big stock sale, just wait until March 18.
That's when a select group of company insiders and big investors will be free to sell 429 million additional shares, according to documents Alibaba has filed with securities regulators.
The number accounted for about 16% of the company's outstanding shares as of Dec. 31, when the total shares were 2.59 billion.
It's also more shares than the number sold during Alibaba's (BABA) IPO, the largest stock offering ever, when the company, its executives, investment banks and other insiders sold 368 million.
Like its record-shattering September debut, Alibaba's pending 180-day lockup expiration, on shares held by certain "employees, former employees... institutional shareholders" and one holder of "convertible preference shares" will be quite large.
As mutual fund managers who own it and employees who have options on it can soon sell for the first time, this expiration overhang may exert significant selling pressure on Alibaba's stock.
Alibaba.com Inc. - Stock Price (Past Year) | FindTheCompany
The good lockup news for Alibaba retail investors is that the sellers this month won't include the company's four largest pre-IPO stakeholders, namely Softbank, Yahoo, Alibaba CEO Jack Ma and its executive vice chairman, Joe Tsai.
Among them, those early investors owned just over half the company after the IPO, and the lockup on their 1.6 billion shares won't expire until September.
That's when Wall Street will see the mother of all expirations.
This first expiration — one-third smaller but still massive — later this month will come on the heels of a huge pile of Alibaba news.
The big bearish news came out in late January, when the company revealed it wascriticized by a Chinese agency for not doing enough to curb counterfeiters and fraudulent Web storefronts on its shopping platforms.
That helped set off a one-day stock drop of 9% on Jan. 29, after Alibaba's quarterly earnings report showed sales rose 40% from a year earlier but profit dropped 28%.
The spat between Alibaba and a regulator-cum-agency on its home turf began a guessing game over how much of the company's business in China, on its Taobao and Tmall e-commerce sites, might be illegal.
In the past week, a stock report by Morgan Stanley, which helped underwrite Alibaba's IPO, guessed that the impact of fraud and counterfeits will be somewhere in "the low- to mid-single digits" range.
That's the latest guess from Wall Street on what the percentage hit to Alibaba's revenue estimates will be.
Over the last 60 days, the 28 analysts who cover the company have trimmed an average of 3 cents a share off their estimates for adjusted, per-share profit during the current quarter ending in March.
On the bullish side, the company said it opened a data center in Northern California (though it kept its exact location secret.)
That stoked optimism that Alibaba will enter the U.S. market for so-called cloud-based Web hosting services, a market now contested by Amazon, Google and Microsoft.
USA TODAY
Amazon sets up shop on Alibaba's Tmall in China
Alibaba shares opened trading on Sept. 19 at $92.70 a share and closed their first day of public trading just below $94.
Within two months, the stock hit $120 as retail brokers began selling it for the first time.
On March 6, it was trading about 30% lower, at around $84 a share.
Yet it's still also well above its IPO price of $68.
That means the insiders and professional money managers who got pre-IPO shares are still sitting on a profit of about 23%, while many retail investors are under water.
Now mom and pop investors who made a run at some Alibaba fun face an expiration-overhang bigger than those that depressed the shares of Facebook and Twitter in the wake of their offerings.
Unlike Facebook and Twitter, whose shares sank well below their IPO price during their first years of public trading, Alibaba has kept its biggest investors happy and profitable at least so far.
We'll get an update on how bullish they remain on the company's valuation starting March 18.
John Shinal has covered tech and financial markets for more than 15 years at Bloomberg, BusinessWeek, The San Francisco Chronicle, Dow Jones MarketWatch, Wall Street Journal Digital Network and others. Follow him on Twitter: @johnshinal.
John Shinal, Special for USA TODAY11:19 a.m. EDT March 9, 2015
50TWEET 1LINKEDIN 1COMMENTEMAILMORE
SAN FRANCISCO — If you thought Alibaba's $25 billion initial public offering last September was a big stock sale, just wait until March 18.
That's when a select group of company insiders and big investors will be free to sell 429 million additional shares, according to documents Alibaba has filed with securities regulators.
The number accounted for about 16% of the company's outstanding shares as of Dec. 31, when the total shares were 2.59 billion.
It's also more shares than the number sold during Alibaba's (BABA) IPO, the largest stock offering ever, when the company, its executives, investment banks and other insiders sold 368 million.
Like its record-shattering September debut, Alibaba's pending 180-day lockup expiration, on shares held by certain "employees, former employees... institutional shareholders" and one holder of "convertible preference shares" will be quite large.
As mutual fund managers who own it and employees who have options on it can soon sell for the first time, this expiration overhang may exert significant selling pressure on Alibaba's stock.
Alibaba.com Inc. - Stock Price (Past Year) | FindTheCompany
The good lockup news for Alibaba retail investors is that the sellers this month won't include the company's four largest pre-IPO stakeholders, namely Softbank, Yahoo, Alibaba CEO Jack Ma and its executive vice chairman, Joe Tsai.
Among them, those early investors owned just over half the company after the IPO, and the lockup on their 1.6 billion shares won't expire until September.
That's when Wall Street will see the mother of all expirations.
This first expiration — one-third smaller but still massive — later this month will come on the heels of a huge pile of Alibaba news.
The big bearish news came out in late January, when the company revealed it wascriticized by a Chinese agency for not doing enough to curb counterfeiters and fraudulent Web storefronts on its shopping platforms.
That helped set off a one-day stock drop of 9% on Jan. 29, after Alibaba's quarterly earnings report showed sales rose 40% from a year earlier but profit dropped 28%.
The spat between Alibaba and a regulator-cum-agency on its home turf began a guessing game over how much of the company's business in China, on its Taobao and Tmall e-commerce sites, might be illegal.
In the past week, a stock report by Morgan Stanley, which helped underwrite Alibaba's IPO, guessed that the impact of fraud and counterfeits will be somewhere in "the low- to mid-single digits" range.
That's the latest guess from Wall Street on what the percentage hit to Alibaba's revenue estimates will be.
Over the last 60 days, the 28 analysts who cover the company have trimmed an average of 3 cents a share off their estimates for adjusted, per-share profit during the current quarter ending in March.
On the bullish side, the company said it opened a data center in Northern California (though it kept its exact location secret.)
That stoked optimism that Alibaba will enter the U.S. market for so-called cloud-based Web hosting services, a market now contested by Amazon, Google and Microsoft.
USA TODAY
Amazon sets up shop on Alibaba's Tmall in China
Alibaba shares opened trading on Sept. 19 at $92.70 a share and closed their first day of public trading just below $94.
Within two months, the stock hit $120 as retail brokers began selling it for the first time.
On March 6, it was trading about 30% lower, at around $84 a share.
Yet it's still also well above its IPO price of $68.
That means the insiders and professional money managers who got pre-IPO shares are still sitting on a profit of about 23%, while many retail investors are under water.
Now mom and pop investors who made a run at some Alibaba fun face an expiration-overhang bigger than those that depressed the shares of Facebook and Twitter in the wake of their offerings.
Unlike Facebook and Twitter, whose shares sank well below their IPO price during their first years of public trading, Alibaba has kept its biggest investors happy and profitable at least so far.
We'll get an update on how bullish they remain on the company's valuation starting March 18.
John Shinal has covered tech and financial markets for more than 15 years at Bloomberg, BusinessWeek, The San Francisco Chronicle, Dow Jones MarketWatch, Wall Street Journal Digital Network and others. Follow him on Twitter: @johnshinal.
