Scorned Alibaba Group Holding Ltd (NYSE:BABA) investors didn’t take too kindly to the lack of availability of shares on IPO day before it made its 38% pop, some of whom decried the system as being unfair, or even rigged. Former broker and current financial analyst and Fox Business News correspondent Charles Payne discussed the issue on FBN and declared there’s nothing unfair about loyal investors and funds being given preferential treatment over casual players.
“Investors who got Alibaba at $68 probably do a lot of business with those brokerage firms. They don’t show up a couple times a year and go “hey, what’s the hot IPO, give me some because it’s fair”. It’s not about being lucky, it’s not about being unfair,” Payne said.
As Payne added, aside from perhaps a hot stock’s IPO day, as in the case of Alibaba Group Holding Ltd (NYSE:BABA), investors can get in on all the action they want, which includes formerly hot IPO’s like that of Facebook Inc (NASDAQ:FB), which still have just as much long-term money making potential as any hot IPO. Facebook Inc (NASDAQ:FB), which was as low as $23 a share just 15 months ago, is now trading at $76.98, a 215% increase.
“Ironically, there was little demand for Facebook this year when it came down to $30 a share; you could’ve bought all you wanted, but you didn’t. No one said it was hot, it was looking kind of weak right? The stock market isn’t about luck. It’s about taking advantage of opportunities and a kind of commitment that goes way beyond just rolling the dice and showing up for the hot moment,” Payne added.
Nor is it as if individual investors were the only ones who had trouble getting a piece of Alibaba Group Holding Ltd (NYSE:BABA). As CNBC reported, many hedge funds also expressed disappointment at their small allotment of shares. Alibaba Group Holding Ltd (NYSE:BABA) and the underwriters spent a considerable amount of time going through each allocation, rewarding funds with ties to the company, as well as funds which were expected to hold onto the stock long term and not just cash in on it and make a quick buck.
That aspect of loyalty and commitment is something would-be investors should consider the next time they expect to get in on a hot stock like Alibaba Group Holding Ltd (NYSE:BABA) on day one, and whether their track record really justifies them being rewarded like that.
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