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Alibaba Group Holding Ltd (BABA) Pop Will Force Bigger Investment from Smaller Investors

Alibaba Group Holding Ltd (NYSE:BABA)’s potential investors should expect to have to pay a premium on the IPO’s expected price range of $66 to $68 when it launches Friday, before they’ll be able to get their hands on it. According to Telis Demos of The Wall Street Journal speaking with Fox Business News today, Alibaba Group Holding Ltd (NYSE:BABA)’s IPO is geared towards institutional ownership, and not the smaller investor, and that will conspire to leave them on the outside looking in during day one trading. 1

“If they want to get people to really make a big purchase and kind of commit to the stock for a long term, they’ve got to give them a fair amount of stock, and so it doesn’t leave a lot on the table for the little guys. And so really, you and I are looking at it and saying ‘do we want to buy this once it starts trading’. And don’t forget it’s not even kind of at the IPO price you can buy it on Friday once it opens,” Demos said.

Interested investors in Alibaba Group Holding Ltd (NYSE:BABA) are instead looking at prices on the stock potentially in the $75 range once they’ll realistically have access to it in the after hours market, and should have that figure in mind when determining whether the stock is worth investing in or not, as opposed to the price range figure of $66 to $68.

Alibaba Group Holding Ltd (NYSE:BABA) raised that price range in a filing with the SEC earlier this week, from what was initially forecast to be a $60 to $66 price range. The new range sets them on a path to a $25 billion IPO, which would be by far the largest in U.S history. Such an IPO would value them at $168 billion, more than, Inc. (NASDAQ:AMZN)’s current market cap of $150 billion.

Demos predicted the IPO price could pop as much as 15% within the first few minutes of trading Friday, before giving some of those gains back and settling in at around 10%. Alibaba Group Holding Ltd (NYSE:BABA) has experienced furious growth in China, with net income nearly tripling to $1.99 billion during their last quarter.


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