Alibaba Group Holding Ltd BABA 3.61% approaches the one-year anniversary of its record-breaking NYSE IPO on September 19, the stock’s first-day closing price of $93.89 and its all-time high of $120.00 seem like very distant memories for Alibaba shareholders.
Unfortunately, with the stock sitting near all-time lows at around $62 per share and a massive 1.6 billion-share lockup expiration coming on September 20, it seems as though Alibaba shareholders will not have much of an anniversary celebration this year.
The Lockup Expiration
The September 20 lockup expiration means that nearly two-thirds of Alibaba’s outstanding shares will soon be free to be sold for the first time, an event that could potentially flood the market with Alibaba shares.
This will not be the first Alibaba lockup expiration. Back on March 18, a much smaller lockup of about 429 million shares expired. In the month that followed, Alibaba’s share price declined by 3.1 percent.
The Company’s Take
Of course, the vast majority of the unlocking shares are held by insiders that the company believes will not be selling any time soon.
“Share financing is very common for founders and senior executives who hold such a strong belief in the future growth potential of their companies,” an Alibaba spokesperson told Benzinga. “This is prudent financial planning and management.”
The company is certainly right that lockups are common among the recent blockbuster tech IPOs. Both Facebook Inc FB 2.19% and Twitter Inc TWTR 1.03% struggled during their first year of trading, which included huge lockup expirations.
Facebook shares finished their first year down 31.3 percent from their opening price, while Twitter shares declined 10.2 percent.
After the first year of lockup-related selling, Facebook recovered nicely in its second year of trading, gaining 125 percent. So far Twitter shareholders haven’t seen such a rebound, as the stock has fallen 32.6 percent in its second year of trading.
Alibaba shareholders are anxious to get this major expiration behind them and are hoping that Alibaba can soon follow Facebook’s path to a prosperous sophomore year on the market.