Alibaba shares fall as lock-up period expires

By Chuck Mikolajczak

NEW YORK (Reuters) - Alibaba Group Holding Inc declined on Wednesday, as a six-month period prohibiting insiders from selling their shares expired, an event that many thought could expose the Chinese e-commerce giant's stock to more weakness.

Shares were down 0.9 percent at $83.70. Consolidated volume was about 18.3 million after the first hour of trading, topping its 10-day average of 16.8 million. The stock has shed nearly 30 percent since its Nov. 10 closing high.

The lock-up period that expires Wednesday will allow insiders owning a total of 437 million Alibaba shares to sell.

By the time all those shares are released, that chunk, representing about 18 percent of outstanding shares, exceeds the 368 million it sold in the IPO, though about 100 million held by employees cannot be sold until the company reports results in May.

"Lock up expiration dates are fraught with selling," said Kim Forrest, senior equity research analyst, Fort Pitt Capital Group in Pittsburgh.

"Who knows what people actually paid or what their cost basis is. But a lot of the time, people don’t care, they just want some cash, some liquidity, and that is what drives prices lower regardless of the fundamentals of the company."

A larger lock-up of more than a billion shares held by insiders, including Yahoo! Inc, expires in September. That has raised investor concerns about further drops in the stock as insiders sell.

Alibaba opened Sept. 19 at $92.70, ended its first day of trading at $93.89 and reached its peak Nov. 13 at $120. The stock closed Tuesday at $84.50, about 24 percent above the $68 initial public offering price.

As of Feb 27, short interest in the stock came to almost 57 million shares, or 2.3 percent of Alibaba's outstanding stock (2.488 billion). That's more than double the 21 million shares as of Sept 30, when the Nasdaq began compiling data.

(Editing by Bernadette Baum)