Alibaba Group Holding Limited (NYSE: BABA) shares will be closely watched today, as the six-month lockup period, which prevents insiders from selling shares on the market, expires and 438 million additional shares become eligible for sale.
The e-commerce giant launched on the stock market with great expectations back in September to eventually reach a peak of about $120 per share in November, almost double the initial IPO share price of $68. However, since then the company’s stock has lost almost 30 percent, standing at $84.50 as of Tuesday, as regulatory trouble and poor performance have disappointed investors.
The expiry of the lockup period could further pressure the share price, as insiders who hold 18 percent of the company’s stock will be allowed to sell their shares on the New York Stock Exchange. The influx could be higher than is already priced in, some analysts caution, though Alibaba’s scale will probably absorb much of any extra selling pressure.
The lockup expires as Alibaba is enduring a drop in investor confidence after the Chinese online retailer reported subpar performance in the December quarter of 2014. While there was significant progress in both revenue and customer base, growing by 40 percent and 45 percent, respectively, on an annual basis, investors had expected more.
Furthermore, Alibaba’s stock was further hurt as the company experienced a confrontation with Chinese commercial regulators, who accused the e-commerce behemoth of failing to tackle various fraudulent activities taking place on its online sales platforms.
Meanwhile, a reshuffling of upper management at the company’s core businesses also contributed to uncertainty.
Barclays, Credit Suisse and Deutsche Bank all lowered their price targets for Alibaba over the past two weeks, though all three banks have a target of around $100 and advise investors to “buy”. These very recent figures indicate that analysts doubt the lockup expiry will have a significant impact on the company’s valuation, as investors eye upcoming results for the March quarter as well as the expiry of the 12-month lockup of nearly 1.6 billion shares in September.