Testing time ahead for Alibaba shares

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.

Victor Anthony, an analyst with Axiom Capital, like Flynn, remains optimistic of its share performance.

"The lockup expiration should create share price volatility－but as with most lockups we see the supply being absorbed over time with consistent execution.

"The risk-reward to owning the shares at these levels is in investors' favor with an upside of 48 percent in our bull-case model, versus a downside of 13 percent in our bear-case model," said Anthony.

Wang Xiaoxing, an e-commerce analyst with Internet consultancy Analysys International, said Alibaba will remain China's dominant e-commerce player for some time to come.

"But with the increasingly furious competition of the e-commerce sector in China and the slowing growth momentum of its e-commerce business, the ride ahead of Alibaba will no longer be an easy one."

Facial recognition payment on cards

Alibaba's founder Jack Ma purchased an old German stamp for 20 euros ($21) on his website Taobao in the presence of Vice-Premier Ma Kai and German Chancellor Angela Merkel, and paid for the same with his face.

During the opening ceremony of CeBIT, the world's largest high-tech trade fair in Hanover, Jack Ma introduced a new payment method "Smile to Pay" to the world. While he was paying, he took a picture of his face and after the image was recognized by the system, all he needed to do was a simple "confirm" click.

The technology was jointly developed by Zhejiang Ant Small & Micro Financial Services Group Co, a group which runs the online payment system Alipay, and a Chinese technology company, said Sabrina Peng, a top executive of Alibaba's finance unit.

"We don't have the schedule for when this technology will be fully applied to our payment system," she said

According to Peng, Alipay already has about 20 million global users. The company's aim is to reach 200 million users in the next three years.