Traders Betting On Alibaba Group Holding Ltd (BABA) Lockup Expiration

If you are one of the investors cursing yourself for failing to catch up with the initial public offering of Alibaba Group Holding Ltd (NYSE:BABA) shares, then there is one more chance to grab it. This time it is not through the secondary offering, but the locking-in period expiration would allow insiders to sell part of their holdings. In effect, there would be more floating stocks available in the market, which many traders believe could lead a bearish trend in the near-term.

Insiders Could Sell

As much as 429 million shares of Alibaba Group Holding Ltd (NYSE:BABA) would become free for insiders to sell. The company would release them after the lock up expiration on March 18. As a result of more stock flowing into the market, there is bound to be a bearish sentiment catching up with the investors. The options market has already caught up with the sentiment.

As a reaction to the options market volume, a trader indicated that the stock would drop as much as 13% during the next two week period.

There is also a threat that the shares of the Chinese e-commerce company might trade around its lowest level of $73.75 by March 20. The price would be the lowest since its IPO, September 19th. Currently, it is trading around $86. Therefore, there is every possibility the stock would breach the one-year low of $80.03, once the lock-in period expires.

More Shares Available

The recent increase in options trading was more to do with the expiration of the lock-in period of 429 million shares of Alibaba Group Holding Ltd (NYSE:BABA). As if this were not enough, another lock-in period expires in September, i.e. 1.6 billion shares will become free. Therefore, there will be every possibility of the stock plummeting further in the months to come. Of late, the Chinese company has been struggling to witness an uptrend. However, there is also plenty of growth opportunity for the company to capitalize. Therefore, the sharp dip could be an opportunity to enter the counter.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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