The direct impact of Alibaba's share sale on Xpeng shares should be transient and manageable, Morgan Stanley said.
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Alibaba's plan to sell Xpeng's (NYSE: XPEV) American Depositary Shares (ADSs) has sent shares of the electric vehicle (EV) maker down over the past two days. But in Morgan Stanley's view, the impact of the move will be short-lived.
"The direct impact [of Alibaba's share sale] on Xpeng's share price should be transient and manageable," Morgan Stanley analyst Tim Hsiao's team said in a December 18 research note.
Alibaba's Taobao China plans to sell 25 million shares of Xpeng's ADSs, worth a total of about $391 million, according to a December 15 US Securities and Exchange Commission filing.
Xpeng later said that Alibaba's move was in execution of its investment liquidity strategy mentioned in its third-quarter earnings communication, and not due to a change in its view of Xpeng.
After Alibaba completes the share sale, its stake in Xpeng will drop from 10.2 percent to 7.5 percent.
Xpeng's US-traded shares have fallen 7.54 percent and 1.04 percent in the past two trading sessions, respectively.
"Although a disposal by a major shareholder may give more credence to market bears on near-term stock performance, we think this should alleviate a stock overhang. We would view any more meaningful stock pullback as a good buying opportunity," Hsiao's team said.
Xpeng's stock seems likely to see increased volatility in the near term, especially after significantly outperforming other startup peers, the team noted.
Xpeng was up about 45 percent in the last six months before Alibaba announced its plan to reduce its holdings. Nio (NYSE: NIO) was down 13 percent in the same time period, and Li Auto (NASDAQ: LI) was up 4.88 percent.
Investors could be concerned that other major shareholders might follow suit with their own sell downs, Hsiao's team noted.
In the long run, reducing exposure to a single outside investor might turn out to be favorable, according to the team.
With adequate stock liquidity, finding buyers for the block and digesting the disposal on the open market should be feasible and not particularly painful, the team said.
Alibaba plans sale of 25 million Xpeng ADSs, to remain 2nd-largest shareholder
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