Stocks

Alibaba Group Holding Ltd: Trading Restriction On 1.6B Shares Ends

Exactly a year ago, Alibaba went public in the world’s largest public offering, raising $25 billion. And now a lock of 63% of the company’s total shares has expired. Most of Alibaba’s largest shareholders including Yahoo and SoftBank can sell their shares starting Monday. The amount of stock freed up on Monday (1.6 billion) is five times higher than total shares sold in its public offering. Alibaba had sold 320 million shares in its IPO.

Alibaba Group Holding Ltd: Trading Restriction On 1.6B Shares Ends

SoftBank has no plans to cash in

SoftBank chairman Masayoshi Son said in May that the Japanese conglomerate had no plans to sell its 798 million shares. Alibaba founder Jack Ma and Vice Chairman Joseph Tsai have pledged not to sell their stocks. The two executives own 269 million of the 1.6 billion shares that just became eligible for trading. Alibaba shares have declined more than 45% after reaching an all-time high of $120 in November.

Yahoo, which owns about 15% of Alibaba, is still exploring its options. Yahoo CEO Marissa Mayer was planning to spin off the Alibaba stake into a separate entity without paying taxes. However, the Internal Revenue Service said in a filing with the SEC that it would not rule out the possibility of taxing the spinoff of Alibaba shares. Yahoo may delay its plans as it figures out what to do with its Alibaba stake to avoid incurring a multi-billion dollar tax bill.

Will Alibaba investors sell their holdings at below-IPO price?

Alibaba shares have already fallen below their IPO price. The lockup expiration could drive down the stock further. However, a delay in Yahoo’s plans could give Alibaba some breathing room because investors will have to wait a little longer to access the spinoff’s shares. Another factor is that Alibaba stock is trading below its IPO price, giving existing shareholders and company executives little incentive to unload their holdings.

Recently, Barron’s predicted that the Chinese company’s stock could tumble by another 50%, prompting a swift rebuke from the Hangzhou-based company. Though Alibaba defended its financials, the controversy fueled speculations that the stock price could decline further. The Jack Ma-led company is facing stiff competition from JD.com, which registered 82% GMV growth in the second quarter compared to 34% of Alibaba.

Alibaba shares inched up 0.88% to $64.99 in pre-market trading Monday.