What Investors Need to Know About Alibaba Lockup Expiration

The stock traded up about 1% Tuesday morning following an upgrade from Hold to Buy at Stifel Nicolaus and a price target increase to $99. The new target implies a potential upside of 18% to Monday’s closing price of $84.00. As reported at MarketWatch, Stifel analyst Scott Devitt cited a decline in regulatory risk surrounding charges of selling counterfeit items leveled against Alibaba’s Taobao e-commerce platform.

Perhaps the impact of the new shares hitting the market has already been factored into the stock price, which has dropped by 19% so far this year. The stock posted its 52-week low earlier this month but had regained $4 (5%) by Monday’s close.

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Short sellers increased their positions in the stock by about 3.5 million shares in the two-week short interest reporting period that ended on February 27. The total number of shares now short runs to nearly 57 million, about double the total short interest in mid-October. Short interest jumped from around 42 million on January 30 to more than 53 million in the first two weeks of February, likely in anticipation of the March 18th lockup expiration date.

But wait, there’s more. Immediately following the company’s initial public offering last September, nearly 82% — 2.02 billion — of approximately 2.49 billion ordinary shares issued and outstanding were subject to lockup agreements. A total of 1.58 billion ordinary shares exit a final lockup period in September of this year. In other words, more than 63% of the company’s outstanding stock remains locked up until September. Just sayin’.

The stock was up only fractionally late Tuesday morning, at $84.22 in a 52-week range of $80.03 to $120.00.