Alibaba is on an upwards run, what's behind this move?

Alibaba Group Holding's shares were up by as much as 6.4% during the early morning trading session before settling at a 5.9% gain as of 11:15 a.m. (ET).
CENTRAL, Hong Kong - Feb. 24, 2022 - PRLog -- It would appear that a combination of two things are responsible for the benefits. One might be a simple "buying of the dip" following a negative day yesterday, when suspicion arose that a significant investor was about to sell Alibaba stock. Secondly, reports on Tuesday suggested that China's state backed investment funds may start purchasing local shares, perhaps providing a near term floor for the battered Chinese markets.

Citigroup, a prominent investment bank, said yesterday that based on a recent report, Alibaba is registering 1 billion new shares with the Securities and Exchange Commission, which might be issued as American depositary shares (ADSs) that trade on the New York Stock Exchange. The inference is that Alibaba is considering issuing its staff stock based remuneration in the United States. The further 1 billion (ADSs) registration indicates that some insiders are planning to sell a large number of shares that have never been registered with the Securities and Exchange Commission (SEC) in the United States. Softbank, a major investor in the global technology industry, is one of Alibaba's biggest insiders. Recently, Investors have been selling off big positions in Asian technology stocks. As a result, Softbank has been under mounting pressure in order to raise money.

As an early investor, Softbank still holds about 25% of Alibaba's shares, thus selling Alibaba stock might be one of the key possibilities for Softbank in order to raise funds. Of course, considering that Alibaba's stock is down more than 60% from its all-time high, a significant investor jumping out at these low prices would be unsettling. As a result, Monday's advance might simply be a rebound from yesterday's loss. If Softbank is a real "forced seller," which means it is selling for reasons other than Alibaba's fundamentals, some may see an opportunity. Some investors may see enormous time value in Alibaba's shares, given that the firm prices at just 13 times next year's profit expectations.

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Monet Chua

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