Alibaba co-founder Jack Ma.
Philippe LOPEZ/AFP
Chinese e-commerce giant Alibaba has announced plans to split into six businesses, prompting shares to rally on investor optimism that the restructuring will spur more IPOs in the future.
Alibaba’s shares rose more than 14% in Wednesday morning trading in Hong Kong after Chief Executive Officer Daniel Zhang announced the restructuring in an email to employees on Tuesday. The rally follows the dual-listed New York company’s 14.3% gain overnight, which added $1.2 billion to co-founder Jack Ma’s fortune and made him one of the top five gainers on the real-time billionaires list made the world.
The reorganization – which Zhang described as “the most significant corporate governance overhaul” in the company’s 24-year history – will result in the creation of business units that include: cloud computing, Chinese e-commerce, global e-commerce, grocery delivery and local services, intelligent logistics, and digital media and entertainment.
Each of the six entities will have its own CEO and board of directors, with Zhang himself remaining responsible for Alibaba Group and the cloud computing entity.
“The market is the best litmus test, and any business group and company can conduct independent fundraising and IPOs when they are ready,” Zhang wrote in the email, according to Alibaba’s own news site Alizila.
Meanwhile, logistics unit Cainiao, Southeast Asia-based Lazada, as well as local services platform Eleme and supermarket chain Freshippo are all companies that have outside investors who “enable them to move toward independent listings,” according to the report, a note by the Blue Lotus Research Institute published through the Smartkarma platform.
“We expect the split to benefit BABA’s share price from a valuation perspective,” Shawn Yang, Blue Lotus’s managing director, wrote in the report, adding that the company has 20% upside potential based on its Calculation using a sum of the parts approach.
For her part, Alizila did not mention when the restructuring would be completed. An Alibaba spokesman did not immediately respond to messages seeking comment on the company’s expected timeline for the overhaul.
The announcement of Alibaba’s restructuring coincides with Ma’s return to China. After traveling abroad for more than a year while Alibaba and fintech giant Ant Group were under intense government scrutiny, the 58-year-old mogul was recently spotted attending a private school in the scenic city of Hangzhou. He stepped down from the helm of Alibaba in 2019 and plans to gradually relinquish control of Ant Group. It remains unclear how long Ma intends to stay in Hangzhou, which is also the home of the e-commerce giant.
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