Two Observations From Alibaba's (NYSE:BABA) Decline

3. April 2022

As you can see from the trend, individual insiders have trimmed their stake while private companies boosted it.

However, the most significant change is the decline of institutional interest as they dropped about the same size of shares that retail investors picked up.

What Does This Mean for Investors?

All of the retail investors' favorite stocks that experienced significant rallies in the short term did so because of short-squeezes. These were stocks with exceptionally high short interest, usually deep into double-digits.

Yet, at the moment, Alibaba has a short interest of 1.68%. While this doesn't mean a short-term rally cannot occur. As recently as one month ago, the stock rallied over 50%. A retail-driven short-squeeze is unlikely due to a lack of short-sellers.

As for the ownership changes, there are 2 observations – both of which are negative. The first one is the lack of insider buying after a significant decline. If anything, insiders decreased their stake from 3.3% to 3%. The second one is a gradual decrease of interest from institutional investors, who slowly reduced their stake by over 5%. While institutions make mistakes like everyone else, their decisions are generally classified as informed.

While it is well worth considering the different groups that own a company, other factors are even more important. You should be aware of the 3 warning signs we've spotted with Alibaba Group Holding. But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full-year annual report figures.