Will Novice Investors Panic Sell Alibaba If It Goes Down More?

BABAI think it is safe to say that the Alibaba IPO brought tens of thousands of new investors to the table. But unlike Facebook (the last stock that was mega over-hyped) that was mainly a United States based IPO, many of these Alibaba first time stock buyers came from overseas which added greatly to the numbers. And clearly, the level of knowledge many of these investors have is at an all time low. To prove this, take a look at the many Alibaba stock comments and questions on this article which led up to the IPO. Some of the questions are breathtakingly ignorant and show that many of the new BABA investors have no idea at all what stocks are.

Back to Facebook for a second: right out of the gate, Facebook stock fell and I’m sure that caused panic selling among many who chose to make it their first stock purchase ever. People don’t like to lose money and it makes them unhappy, especially if they have no idea of what they are doing or what they are investing in.

So far, BABA has done nothing but go down as well and most, if not all of these newbie investors are now underwater. After shooting up to almost a $100 price early in the IPO trading day, the stock has come down, and down steadily. Many of these first timers are in at prices between $92.70 and its high of $99.70 if they bought the stock in the first hour of it trading. But now that the stock is selling for under $88, many of them are probably scratching their heads and wondering what went wrong.

Its a good thing when people get excited about investing for the first time. Far too few people in the world know how to manage their money much less save or invest it. The IPO’s of FB, TWTR, and now BABA all brought in prospective investors who got/are getting a taste of the market for the first time. That is a good thing.

However, knowing human nature and understanding just how little many of these new investors know, it pains me to see Alibaba go down right from the start. I just know that many of these new stock owners are dumping their stock, or thinking hard about it, never to return. With all the false hype about the stock market only being for the rich, it hurts when new people find their way through the door only to leave with the perception of being burned.