Testing time ahead for Alibaba shares

German Vice-Chancellor, Economy and Energy Minister Sigmar Gabriel (left) holds a product and talks with the founder and executive chairman of Chinese e-commerce company Alibaba Group Holding Ltd, Jack Ma, as he visits the Alibaba stand during his visit to the CeBIT technology fair in Hanover, Germany, on March 15, 2015. [TOBIAS SCHWARZ/AFP]

Alibaba Group Holding Ltd, the Hangzhou-based e-commerce giant listed in New York last year, has confirmed that the 180-day lockup period of about 437 million of its ordinary shares will end on Wednesday, suggesting there could be a flood of its stock onto the market.

Alibaba's record-breaking IPO raised $25 billion on Sept 19, 2014.

Of the shares that will no longer be subject to the lockup, around 100 million will remain subject to Alibaba's employee trading restrictions until after the announcement in May 2015 of its earnings results, according to a statement released by the company.

The expiry of the lockup on Wednesday will, however, still make roughly 13 percent of Alibaba's shares available for sale to the public, which could raise concerns of a further drop in its share price.

Initial public offering lockups typically last anywhere from 90 to 180 days after the first day of trading, and are put in place to prevent shareholders with large proportion of ownership, such as company executives, from selling shares during the initial trading period.

However, analysts including Neil Flynn, portfolio manager at Alcuin Asset Management, said they remained bullish on Alibaba over the long run despite some existing risks it still has to overcome.

Despite its share price falling significantly since its quarterly earnings released at the end of January, Flynn said: "With all of the strong drivers in 2015, including the launch of Alibaba bank and its investment in social media, such as SnapChat, I don't think insiders would want to sell now."

"But until the lockup, we won't see many gains from Alibaba because investors will be concerned about it.

"Given the performance of the share price over the past few weeks, I think the lockup expiry is already priced into the valuation, and afterwards, we will see a rally," said Flynn.

Alibaba's share price has slipped from more than $100 at the beginning of the year to $81.86 as of Friday mainly due to its fight with the State Administration for Industry and Commerce, China's top commercial regulator, over counterfeit goods being sold on its Taobao site.

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