2/2/2015 Update: When I asked my readers “should I buy Alibaba stock” I got the overwhelming response that they wanted me to. However, due to the tremendous hype around the stock and my fear that would create too high an opening price, I decided not to and as of this date still do not own any shares.
The stock is trading today at a price of $89.82 which is considerably down from the $120.00 price the stock hit last year. The overall market is very choppy and BABA stock has NOT been performing well since it hit that high. If I do buy the stock, I will at least wait until mid April which is when the big insider lock up periods expires. I fear that lockup will keep Alibaba’s share price depressed and give investors a better entry point than they have now.
These lockup periods and high publicity are reasons why I don’t usually buy into IPO stocks when they go public. I fear all the hype means I will be paying more for the stock than I should. I feel the same way about two other high profile stocks that may go public in 2015 or 2016: I won’t buy Snapchat stock or buy Uber stock. At least not right away.
I caution all buyers of BABA to understand that there is risk in this stock and no one knows whether the stock will be a successful investment into the future.
The Alibaba stock IPO will take place on September 19th, 2014 and like many investors, I am thinking about buying shares. It is reported that the stocks will initially be offered at a price of between $60 and $66 per share but when the stock opens it could go higher quickly and that presents a dilemma for investors who want to buy in.
I see my options as 1) buying BABA stock right at the open on the first day, 2) waiting a while to see what happens with the stock before I buy, or 3) choosing not to buy any shares at all. There is no telling what will happen to the stock price in the frantic hours right when the stock opens but every investor I’m sure wants to get it at the lowest price possible.
I already own 600 shares of Yahoo in anticipation of the Alibaba IPO and so far I have made money on that. Assuming the IPO goes well and the stock is bid up right from the open, my Yahoo shares might go up even more. But that doesn’t help me figure out whether I should buy Alibaba stock as a pure play.
I do think Alibaba is and will continue to be a strong presence in China e-commerce and perhaps in the United States as well some day. I also know there is a TREMENDOUS amount of hype surrounding the stock from investors all over the world. This is the biggest international IPO in the history of the New York Stock Exchange. The staggering amount of coverage this IPO is getting scares me a little because many investors have unrealistic expectations and think buying the stock will be a slam dunk winner. To see this, just read my post on buying Alibaba stock to see all the comments from complete beginners who want to buy it the first day. Scary!
I have included a poll below to see what you think I should do. Should I buy Alibaba stock or give it a pass?
The results of this poll were overwhelming that I should buy BABA stock at the IPO. However, I chose not to do that and have been glad ever since as the stock has performed very poorly.