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Afternoon Note

Pros & Cons of Alibaba IPO

By Charles Payne, CEO & Principal Analyst
9/18/2014 3:26 PM

I will begin my show “Making Money with Charles Payne” on Alibaba (BABA) tonight and have other investment pros.  Weigh in and make sure you watch Fox Business at 6PM EST.

At some point we’ve all read the story of Alibaba and the Forty Thieves and the vault of riches hidden behind bushes that unlocked and opened upon the command of “Open Sesame.”

Tomorrow morning, many investors will open their wallets to buy shares in the biggest initial public offering ever, hoping for a similar reward.

There is simply so much hype here that it’s tough to understand where the stock finishes its first trading session even though the company is in the driver’s seat in China and positioned to dominate.

The stock is getting the kind of hype that only comes around periodically, and the last time was reserved for Facebook (FB), which turned into a nightmare for investors that bought in the early days.

Facebook took advantage of its prestige and public face to suck every nickel available for its own coffers.  Some will say that’s smart stuff, others think it was poor taste and even unsavory. Since Alibaba is a Chinese company, there’s already a certain amount of corporate distrust. Then there’s the odd structure of the deal, and management can’t afford similar ill-will after it makes its debut.

 

Get Rich Quick???

Share Price

Action

$68

At this level, the stock looks attractive to traders and investors

$80

I would think short-term traders can buy

$90

Only experienced day traders with great execution should consider

$100

Above $100 I would avoid initially and would consider waiting for financial reports as publicly traded company

NOTE:

There should be a 10% or $7.00 stop loss, whichever is tighter, for investors and traders

Company Facts

IPO facts

Note:  this isn’t my long-term opinion; it’s just an observation on how to “play” the stock out-of-the-gate. Earlier today, someone tweeted me that they lost a lot of money on RWLK: a company I love and a stock we made money on with the Swing Strategies service. Because it’s a volatile name, and because I love their mission aside from the investment story, I knew people would buy the stock. So as a rare favor, I tweeted out to everyone that they should consider a stop loss at $39.00.

Obviously this guy didn’t. The morning that Facebook went public, I went on Fox & Friends on Fox News Channel and asked people not to chase the stock. That was then. Right now Facebook an open long position on the Hotline service and is up double-digits from the recommendation level. The point is that tomorrow Alibaba (BABA) will be a circus, and I hate that so many non-investors will jump in will have this represent their entire investing experience.

 


 

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