Alibaba: Some Color on BABA's Upcoming Lock-up Expiration
On Wednesday, March 18, one of BABA's lock-up restrictions will expire, freeing up 437 million common shares to be traded on the public market. In a press release issued by BABA on March 10, the company stated that of these ordinary shares now coming available, approximately 100 million shares will remain subject to BABA's employee trading restrictions until after the announcement in May 2015 of its earnings results for the quarter and fiscal year ending March 31, 2015.
- This expiration will unlock a large amount of stock, accounting for nearly 40% of the current total float. The shares will be available for trading the next morning, on March 19.
- BABA already had one lock-up expiration, 90 days after its IPO (12/18/2014), but that was only for 8.1 million shares.
- As foreboding as this week's lock-up expiration seems, there is actually a much larger one coming up in mid- September in which 1.4 billion shares will be free to hit the market.
- With Wednesday's lock-up expiration and the one looming in September, there will be a massive amount of supply for the market to try and soak up in the coming months. Between this situation, and the recent non-flattering reports coming out about counterfeit goods and fake user accounts, it has been a rough few months for shares of BABA, down nearly 20% year-to-date.
- Today, however, shares are displaying some impressive relative strength, up 3-4%, even in the face of Wednesday's lock up expiration. It is not too uncommon to see a "buy the news" reaction (at least temporarily) once the expiration date actually hits, as investors look forward to that overhang moving to the rear-view mirror. In the case of BABA, though, investors will have to face yet another huge lock-up expiration in 2015.