BABA - Alibaba Group Holding Limited

Discussion in 'Stock Market Forum' started by Brad321, Sep 23, 2014.

  1. Brad321

    Brad321 Active Member

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    What a start to BABA! From almost hitting $100 on the first day of trading to a close just shy of $90 on the second day.

    Not too many people DON'T have an opinion on BABA. It is either grossly overvalued or undervalued depending on which camp you are in.

    The Bulls see a China-play. The fanaticals see it as a China INTERNET-play and foam at the mouth when they think of the enormous growth potential. The Bears see a disaster waiting to happen with yet another Chinese VIE and no resolution to whether or not this company can ever be held accountable to the interests of those owning stock in the US-registered shares.

    My personal opinion is the risk is not worth it, but I am willing to listen to the comments from those who believe there is a value proposition here. I had a short order entered at $100 and it never quite got there to fill. I didn't chase it, but think it will work its way back to at least $75.

    The next trading opportunity to watch for is when the lock-up shares become free-trading. Have to believe there will be some profit-taking at that time.

    So which is it? Will we see a run to $200 as some believe or is this Chinese VIE not ready to see institutions risk having it blow up on them and it heads back to the issue price n the $60s? I just can't feel comfortable trading them yet and we'll see which prognosticators can correctly call the future of BABA.

    Perhaps I wouldn't be so hesitant if their stock symbol didn't sound like sheep being led off to be sheared. Baa Baa.
     
  2. JR Ewing

    JR Ewing Super Moderator Staff Member

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    You can't short or trade options on IPOs right away - there is always a period of so many trading days before shorts and options begin.

    Short Interest BABA
    Shares Outstanding2,465.01 Mil
    Float
    Shares Short (as of —)
    Short % of Float
    Short Ratio
    Shares Short Chg. (from —)



    I typically wait until after a lockup expires if there is one before I mess with IPOs much, if at all. Since there wasn't one here, I was in no hurry to get in. Insiders and others have sold quite a bit so far. There is always added risk with Chinese companies - political, lack of oversight, etc.

    I might buy a LITTLE after shorting and options start if it gets below 80, maybe more if it manages to fall below 70.

    The good thing about waiting after 6 months or so is that you get to see a couple of quarters of earnings to research before putting any money in.
     
  3. Brad321

    Brad321 Active Member

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    The options always take a little while to kick in, but the shorting is more dependent on who the broker is as to when they will begin executing orders.

    The key is the broker needs to assure they have "located" the shares for you to borrow. Some brokers wait a few days until there are settled trades and they clearly have the shares available to loan out. Others take the more literal interpretation and say they have "located" the shares when the trade settlement is pending.

    In a general sense, you can also watch which bankers are part of bringing an IPO to market to figure out if their brokerage unit might be able to support shorting pretty much immediately.

    Then there are the brokers that on a wink and a nod will do whatever they want and worry about the consequences later. I have shorted stocks on their opening day many times. The only time I ever got the trade reversed was with Facebook. My broker told me the trade was unable to settle and reversed it. No worries as I knew this was a possibility.

    It all boils down to... it never hurts to ask. I have a great rapport with my brokers over many years. They know I understand how the system works and I won't sue them if the occasional trade gets unwound because we stretched the limits. They almost always let me cover a short before the original trade settles, but they don't have to.

    You will see your first outstanding short interest report on BABA on 10/09/2014 for trades settled through 09/30/2014. Now that will be interesting!
     
  4. JR Ewing

    JR Ewing Super Moderator Staff Member

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    "Wink and a nod"? I'd think there would be possible consequences - audits, etc. And it seems like there would be noticeable short interest right away from big boys if there was any shorting going on at all before there was supposed to be.
     
  5. Brad321

    Brad321 Active Member

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    The short interest on BABA will not be reported for the first time until October 9th for the period with trades settled through September 30th. It is a matter of opinion if a broker can execute short trades the first few days. They use varying definitions of what constitutes showing the shares are "available" to borrow. Some will say, "We have enough customer orders in margin accounts that we know will settle in a few days that we are confident we have met the standard for 'locating' the shares to loan out in a short trade". Others want to have the trades settle first so there is no question. There is enough liquidity here that nobody is afraid of a failure to deliver and not being able to locate shares.

    Options are going to begin trading on Monday, September 29th. Sometimes you can find some good options trades early, but I have a hunch on BABA the spreads will be really high and no good deals will be found on either Calls or Puts. I will be watching though just in case. I may be interested in around $70 to $75 Puts about 6 months out if the price is right.
     
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