Why Alibaba Stock Crashed 5.5% Today
What happened
Shares of Chinese e-commerce giant Alibaba Group Holding (NYSE: BABA) stock tumbled 5.5% through 10 a.m. ET on Monday, the first trading day after the Olympic games began in Beijing.
The Olympics weren't the reason investors were selling, however. (The opposite is actually true.) Rather, investors appear to be spooked by a report from Citibank this morning, which suggests a major Alibaba shareholder may be looking to dump stock on the market.
Image source: Getty Images.
So what
Specifically, Citibank pointed to a Friday Form F-6 filing by Alibaba with the U.S. Securities and Exchange Commission, reports StreetInsider.com. In this filing the Chinese tech giant unexpectedly registered "one billion [American depositary shares, or ADS] to accommodate the issuance of additional ADS upon the deposit of ordinary shares by current holders who have indicated to the company."
Citi was quick to note that this does not indicate that Alibaba is issuing new shares (so don't worry about stock dilution). But it does suggest that certain "holders of ordinary shares, especially those shares that have never been registered with SEC," may be planning "to sell their shares in ADS rather than as ordinary shares in HK Exchange." Reading further between the lines, Citi speculates that Alibaba shareholder Softbank, which is Alibaba's biggest shareholder with a 24.8% stake in the company according to data from S&P Global Market Intelligence, may be preparing to unload some of the 5.4 billion shares of Alibaba stock it owns -- a move that could increase selling pressure on Alibaba's stock.
Now what
Mind you, this is all just speculation at this point, but it appears investors think Citi's scenario looks likely enough that it's spooking the market today.
That being said, not all the news is bad. On the business front, Citi reported that from Jan. 31 to Feb. 4, skiing-related equipment sales on Alibaba-owned Tmall had increased by over 180% year over year, while snow and ice sports category sales surged by more than 300%, and winter snow related travel package orders grew 30% on Alibaba-owned travel booking platform Fliggy. In fact, Citi says that "on the night of Feb 4 of the Winter Olympics opening ceremony, over 1mn users entered the Olympics Tmall Flagship Store to purchase Olympics related souvenirs."
So if the bad news today is that one of Alibaba's shareholders may want to sell Alibaba shares, the good news is that Alibaba's customers are very eager to buy stuff on Alibaba's websites -- and that should provide a boost to this quarter's revenue and profits.
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