When Alibaba Group Holding Ltd. (NYSE: BABA) held its initial public offering (IPO) in September of last year, the company sold about 600 million of some 2.5 billion shares outstanding. More than 300 million shares exited a lockup period in March, and the remaining 1.6 billion shares are set to exit their lockup period later this month. On top of other concerns about the company, those newly salable shares are putting heavy pressure on the stock price.

Short sellers have begun piling into the stock. As of August 31, more than 74 million shares are short, an increase of nearly 16 million shares compared with short shares in the prior two-week period. The end-of-August total is the highest short share total since the IPO.

Prior to the expiration of its six-month lockup period in mid-March, short interest in Alibaba rose from around 42 million shares to just over 64 million. At that lockup expiration, some 329 million or so shares became eligible for sale and another 100 million were added after the company reported its March quarter results.

Alibaba has been trying to reassure shareholders that of the 1.6 billion shares that are due to be released into the wild this month, the company has received pledges from holders of 1.45 billion shares that they will not sell their shares. The company also announced a $4 billion share buyback when it reported quarterly results recently, an odd decision we thought at the time for a company that had not been publicly traded for even a year.

Early last week, the company said at a conference that China’s consumers are spending less and that put downward pressure on fiscal second-quarter results. The stock immediately got whacked and posted a new post-IPO low of $58.00, less than half its post-IPO high of $120 and about 15% below the IPO price of $68 a share.

Then, over the weekend, Barron’s published a long article on the company that called into question Alibaba’s reported results. The company hit back almost immediately, saying the story “contains factual inaccuracies and selective use of information, and the conclusions [author Jonathan Laing] draws are misleading.”

But Alibaba’s stock, which had climbed back to more than $64 on Friday, has dumped more than 4% Monday to trade around $62 in a 52-week range of $58.00 to $120.00. Toward the end of the noon hour, share volume was already about 25% higher than the daily average of around 15 million.

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