Why Alibaba shares fell 5.5% today

What happened

Shares of the Chinese e-commerce giant Alibaba Holding Group (NYSE: BABA) Shares fell 5.5% through 10 a.m. ET Monday, the first trading day after the start of the Beijing Olympics.

However, the Olympics were not the reason investors were selling. (The opposite is actually true.) On the contrary, investors seem to be spooked by a report of Citibank this morning, suggesting that a major Alibaba shareholder may be looking to sell shares in the market.

Image source: Getty Images.

So what

Specifically, Citibank pointed to a Friday filing of Form F-6 by Alibaba with the U.S. Securities and Exchange Commission, reports StreetInsider.com. In this case, the Chinese technology giant unexpectedly recorded “one billion [American depositary shares, or ADS] to permit the issue of additional ADSs upon deposit of Ordinary Shares by current holders who have notified the Company thereof.”

Citi was quick to note that this did not indicate that Alibaba was issuing new shares (so don’t worry about stock dilution). But it does suggest that some “common stock holders, particularly stocks that have never been registered with the SEC,” may be considering “selling their stock in ADS rather than as common stock at the Hong Kong Stock Exchange”. Reading further between the lines, Citi speculates that the shareholder of Alibaba Software bank, which is Alibaba’s largest shareholder with a 24.8% stake in the company according to data from S&P Global Market Intelligence, may be preparing to shed some of the 5.4 billion shares of Alibaba it has. he holds – a move that could increase selling pressure on Alibaba. Stock.

Now what

Mind you, this is all speculation at this point, but it seems investors think the Citi scenario looks likely enough to scare the market today.

That being said, not all news is bad. On the business front, Citi reported that from Jan. 31 to Feb. 4, ski-related equipment sales on Alibaba-owned Tmall were up more than 180% year-on-year, while sales of the snow and ice sports category had jumped more than 300%, and orders for winter snow-related travel packages were up 30% on the Fliggy-owned travel booking platform Ali Baba. In fact, Citi says that “on the night of February 4 of the Winter Olympics Opening Ceremony, more than one million users entered the Olympics flagship store to purchase Games-related memorabilia. Olympics”.

So if the bad news today is that any of Alibaba’s shareholders might want to sell Alibaba shares, the good news is that Alibaba’s customers are very eager to buy things from websites from Alibaba – and that should boost revenue and earnings this quarter.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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