Alibaba Group Holding Ltd (NYSE:BABA)‘s IPO created hype in the share market last year due to company’s history and size of the IPO. Hardly anyone knew the background story of the IPO subscription. Alibaba had levied a minimum lock-up period on all the subscribers at that time in order to make sure that its shares don’t fluctuate instantly.
Reports claim that finally investors can breathe some fresh air as the lock-up period has come to an end. It expired last Wednesday and allowed investors to sell more than 437 million shares of the company.
What’s Going To Happen Now:
Market experts have their own explanation about the lock-up expiration. According to Veripax Financial Management in Folsom’s President Jerry Verseput, it was just hype and nothing else. When Alibaba was getting ready to launch IPO for U.S. investors, he persuaded his investors not to go with the wind. He is one of those people who never believe in IPOs, especially those that come with a lot of hype. They are like balloons that make you feel good until one day when they blast and spoil the efforts that you had put to throw air in them.
Verseput told one of his clients that if playing with money was the only objective he had, then he would do it, but Alibaba Group Holding Ltd (NYSE:BABA)’s shares shouldn’t be bought for investment purposes. He manages funds worth $65 million. Two of his clients insisted on buying Alibaba’s share, but he made sure that share of their investment was less than 1% of the total assets.
What Verseput said to his clients seems to make some sense now as the shares of Alibaba have gone down more than 29% in the last six months. Alibaba’s P/E ratio is 30, way less than Amazon’s three figure P/E ratio. Even though, maximum of its shares are held by its employees and Yahoo! Inc. (NASDAQ:YHOO), but still experts anticipate that investors’ exit strategy might hurt the company, in the long run.