How to buy, sell and short Alibaba shares

How to buy and invest in Alibaba shares

There are two ways to buy Alibaba shares – via share trading or via derivatives trading. Share trading enables you to buy and own shares, which means you will profit if the Alibaba share price goes up. With derivatives trading (CFDs), you don’t own the shares but you can speculate on upward share price movements (known as ‘buying’).

Learn more about the difference between share trading and trading derivatives trading

How much would it cost to invest in Alibaba?

To qualify for the best US commission rate, you have to be an active client and have placed three or more trades in the previous month.

If you don’t want to buy Alibaba shares outright, you can speculate on the company’s share price using derivates. There are benefits to doing this, including:

• Getting full exposure with a small deposit – usually 20-25%of the full value of the trade¹

How to sell and short Alibaba shares

As with buying, there are two ways to sell your Alibaba shares. You can sell your shares via share trading if you own them or speculate on downward price movements using derivatives (known as ‘selling’) if you don’t want to own shares. Follow these steps to sell or short Alibaba shares:

Alibaba’s live market prices

Trading Alibaba with CFDs

When trading Alibaba using CFDs, you agree to exchange the difference in the price of its shares from when you open the position to when you close it. If you think the share price will go up, you would ‘go long’ and if you think it’s going down, you would ‘go short’.

Understanding Alibaba: a brief history

Led by Jack Ma, Alibaba was founded by a total of 18 people in Hangzhou, China (1999). It launched an online marketplace for wholesale trade and within months it raised $5 million and then a further $20 million, from a number of investors. By 2001, Alibaba.com had one million registered users on its website.

Things moved quickly and Alibaba launched its online shopping website Taobao in 2003. The company was approached by Yahoo! soon after and the two businesses launched a partnership in 2005. Multiple partnerships and acquisitions happened over the next few years, as well as the launch of Alimama (2007), Tmall (2008) and AliExpress (2010). As a result, in 2012, Alibaba completed an initial repurchase of Yahoo! shares.

By 2016, the group exceeded ¥3 trillion in gross merchandise volume, becoming the largest retail company in the world. The share price has started to see some improvement since then.

Alibaba shares: the basics

Alibaba shares listed on the New York Stock Exchange (NYSE) in 2014, under the ticker symbol BABA. The initial public offering (IPO) was at that time the biggest in history, with shares floating at $68.00 and raising $21.8 billion for the business. The stock performed well on the first trading day, closing at $93.89 a share.

Post-IPO the shares didn’t perform particularly well, dropping from $115.10 in November 2014 to $59.24 in September 2015. The drop was attributed to an increase in competition, accusations of selling falsified goods and missed sales estimates. By 2017, the stock started to see positive results due to expansion across segments, increased online spending and inspiring revenue results. Between January 2017 and June 2018, Alibaba’s share price rose by 114%.

In November 2019, Alibaba listed on the Hong Kong Stock Exchange (HKSE) (its secondary listing), floating at HK$176 a share and closing nearly 7% higher at HK$187.60. At the same time, the company’s listing on the NYSE, where shares are fungible with the Hong Kong-listed shares, also hit a six-month high of $194.05.

Alibaba key personnel: who manages the company?

The following people are on Alibaba’s leadership team:

What is Alibaba’s business model?

Alibaba’s business model is focused on trade between businesses. This is what makes it different from its competitors such as Amazon and eBay. Suppliers would buy products from Alibaba.com in bulk and then sell them to consumers at a profit.

The company also has two other web platforms from which it generates money: Taobao and Tmall. Taobao is an online shopping website where individuals and small business can trade, and Tmall is platform for businesses to sell branded goods to consumers. Alibaba has a few subsidiaries, namely AliExpress, Alimama, Alibaba Cloud, Ant Financial and Cainiao Network.

Alibaba fundamental analysis: how to analyse the Alibaba share price

There are many ways to analyse Alibaba’s share price – one such a way is through fundamental analysis. This form of analysis is based on external events and influences, as well as financial statements and industry trends. Therefore, it is important to compare your findings with other companies from the same industry to get a complete view of Alibaba’s performance.

Some of the fundamental analysis metrics you can use to determine the value of Alibaba shares include earnings per share (EPS), price-to-earnings (P/E) and return on equity (ROE).

• EPS is a measure of profitability. To calculate Alibaba’s EPS, divide its profit by the number of outstanding shares
• P/E measures how much you have to spend on shares to make $1 in profit. To calculate Alibaba’s P/E ratio, divide its share price by its EPS
• ROE defines how much income a company makes from its assets compared to shareholder investments. To calculate Alibaba’s ROE, divide its net income by stakeholder equity

Discover the ins and outs of fundamental analysis

¹ Deposits for leveraged trades are 20-25% on 99.77% of tier one US shares.