Crypto Whales Are Loading Up — Are You?
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Shares of Alibaba Group Holding Ltd (NYSE: BABA) appear to have stabilized for the moment at around $75 after dropping to a new all-time low of $71.03 following a disappointing earnings report last week. The company is hoping that an announcement of a new $4 billion buyback program will help take some pressure off of the ailing stock, but the facts show that buybacks may not be a quick fix.
Offsetting dilution
Alibaba’s new buyback plan will help compensate for dilution from the company’s share-based compensation program. In addition to employee compensation, deals such as the recent acquisition of Suning Commerce Group also water down Alibaba’s stock. The Suning acquisition included the issuance of $2.3 billion new Alibaba shares to Suning, which offsets more than 57 percent of the $4 billion buyback plan.
Buybacks: blessing or curse?
Benzinga recently reported on the surprising underperformance among companies with large buyback programs. The group of 15 companies in the S&P 500 that reduced their number of shares outstanding by 10 percent or more in 2014 via buybacks has lagged the performance of the S&P 500 so far this year.
Challenges ahead
James Gellert, CEO of Rapid Ratings, believes that Alibaba’s disappointing revenue number from the most recent quarter is an indication of the difficulty a company the size of Alibaba has in maintaining sky-high growth rates. “Time will tell if their results are indicative of Chinese economic slowdown or Alibaba-specific challenges.”
Gellert’s point about the size of Alibaba appears to ring true when it comes to share price. In both size and scope of operations, Alibaba dwarfs smaller Chinese e-commerce rival JD.com Inc (NASDAQ: JD). However, while Alibaba’s share price has fallen more than 28 percent in 2015, JD’s shares are up 19 percent.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.
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