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Alibaba Group Holding Ltd (BABA)’s Stock Pops and Drops On IPO Day; What to Expect Next?

All the eyes today are focused on the biggest IPO in the US history, Alibaba Group Holding Ltd (NYSE:BABA). The company’s stock surged by 45% above the IPO price, right at the beginning of trading, being priced at close to $99 per share. However, throughout the day, the value of the stock declined and currently stands in the $91-$92 zone. 1
Nevertheless, there are several hours left to see how the stock will behave by the end of the day. However, it is clear that for long-term investors, it is probably too early to get into the company. It is much better to wait and see how it will behave at least for the next couple of weeks. In fact, prior to the IPO, the opinions on this matter are divided among people on Wall Street. While most considered that the stock of the company will pop, and will continue to grow over the next years, others said that they had chosen a waiting strategy to see how the stock will behave on the market, before actually buying shares. CNBC’s Jim Cramer said yesterday that Alibaba Group Holding Ltd (NYSE:BABA) might actually reach mid-80s, which is a $20 premium above the IPO price.
One thing that is certain is that Alibaba Group Holding Ltd (NYSE:BABA)’s current investors will be definitely winners today.  The three largest shareholders of Alibaba, will have a significant exposure to the new publicly-traded company. Japan-based Softbank, even though it does not sell any shares in the IPO, has an over 30% stake of the company, which represents around 797.7 million shares. Other two investors will get some cash after selling a portion of their stake. The second-largest investor, Yahoo! Inc. (NASDAQ:YHOO), will sell 4.9% of its 523.6 million shares, and will have around 16% of the company left. At the IPO price, Yahoo! will gain around $8 billion from the sale, which is a lot of cash for a company with a market cap of $42 billion. Jack Ma, the founder of Alibaba Group Holding Ltd (NYSE:BABA) will sell only 0.5% of his holding, remaining with a 7.8% stake or around 193.35 million shares left. Nevertheless, with Alibaba’s IPO, Jack Ma is securing his spot among the world’s richest people, being also the richest man in China.
Earlier, today, the president of the NYSE Group, Thomas Farley, which operates the New York Stock Exchange, said that he was also excited about the prospects of the company in addition to the fact that NYSE is in fact hosting this huge event in the US stock markets history, as he said being interviewed by CNBC.
“We are confident, but not over confident, it’s a big day. It’s a big IPO, but that’s what we do here, is bring companies to market. We had the four largest IPOs this year that happened on the New York Stock Exchange […],” said Mr. Farley.
 He added that the systems on the New York Stock Exchange are constantly monitored and tested and he is sure that everything will go smoothly today.
With this in mind, let’s wait and see how Alibaba Group Holding Ltd (NYSE:BABA)’s stock will behave today and in the next couple of weeks; and see which of the previous predictions will come true.

Disclosure: none

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