Stay Away from Alibaba and the Forty Institutions, says Knightmare on Wall Street Author Edgar Perez

Edgar Perez, former McKinsey and IBM consultant, is a global expert, author of The Speed Traders, Knightmare on Wall Street, and the course director of The Speed Traders Workshop 2014 Singapore, “How Banks, Hedge and Mutual Funds and Brokers Battle Markets ‘RIGGED’ by Wall Street’s ‘Flash Boys’, High-frequency Trading, Exchanges and Dark Pools”.

New York, NY, USA (September 19, 2014) — A few months ago, markets witnessed the IPO of Weibo, China’s Twitter-like microblogging service; back then, Mr. Edgar Perez, course director of The Speed Traders Workshop 2014 Singapore (http://www.thespeedtradersworkshop.com), proclaimed the firm’s best days were still ahead. With 129 million monthly active users, 300 million registered users and 400,000 brand pages, Weibo remained the strongest social media service for the biggest country in the world. Following their successful April debut, Chairman Charles Chao said that in retrospect their IPO, at $17, was priced too low. However, that proved beneficial for those investors who decided to hold; they are still able to sell at $21.

Demand for Alibaba’s shares appears strong ahead of its expected IPO this Friday. Alibaba said it planned to price its shares at $68, an increased level that would give it a valuation of about $165 billion. There is no doubt the company is a global leader in the e-commerce sphere handling a number of transactions higher than Amazon and eBay combined. However, is that still a good price for retail investors considering the bump that will follow the beginning of trading?

Further clouding the picture, it has been revealed that a number of early investors in Alibaba would be able to sell more than $8 billion worth of shares on the day the Chinese e-commerce company goes public. As The Wall Street Journal reports, insiders and other investors in companies staging initial public offerings are generally required to hold on to shares for several months, in “lockup” arrangements banks design to help protect the stock’s price in its early days. More than 40 investment firms have asked for more than $1 billion.

However, in Alibaba’s case, a number of shares equal to about a third of what could be sold in the deal aren’t covered by such restrictions, according to the company’s public filings. Mr. Perez is questioning why would insiders, the people who are expected to know the company upside down, want to rush to unload their shares if BABA promises to be such a great investment.

Mr. Perez concludes: “Alibaba’s high-profile deal, which could raise as much as $25 billion and potentially be the biggest in history, is not for retail investors. It will probably hit the $100 level on its first day, yet, that will only benefit insiders (who might sell immediately) and well-informed institutional investors (hedge funds and sovereign wealth-funds that might want to hold long-term). Potentially buying BABA at $100 is a scary proposition for retails investors who would rather think of less well-known firms that stand to benefit from the interest generated by juggernaut Alibaba in the ever-growing e-commerce arena.”

Mr. Perez is course director of The Speed Traders Workshop 2014 Singapore, “How Banks, Hedge and Mutual Funds and Brokers Battle Markets ‘RIGGED’ by Wall Street’s ‘Flash Boys’, High-frequency Trading, Exchanges and Dark Pools”, seminar that covers the latest research currently available and reveals how high-frequency trading players are operating in global markets and driving the development of electronic trading at breakneck speeds from the U.S. and Europe to Japan, India, and Brazil. The “flash crash”, the suspended BATS IPO, the botched Facebook IPO, Knight Capital’s trading malfunction and Nasdaq’s Flash Freeze are just a few of the milestones in the history of high-frequency trading that will be dissected with participants.

Mr. Perez is widely regarded as the preeminent global expert and speaker in the specialized areas of algorithmic and high-frequency trading. He is the author of The Speed Traders, published in English, Chinese and Bahasa Indonesia, and Knightmare on Wall Street. He contributes to The New York Times, UltraHighFrequencyTrading.com and China’s International Finance News and Sina Finance.

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