Alibaba company announces breakup — shares skyrocket
Alibaba shares have soared after the company announced plans to break up.
It plans to explore the possibility of raising fresh funding and launching an initial public offering (IPO) for five of the six new units created by the move.
On Tuesday, Alibaba shares rose more than 14% in New York, and on Wednesday, they were up 13% in Hong Kong. Its US-listed shares have fallen by almost 70% since 2020 due to Beijing’s crackdown on tech.
Alibaba said the decision to split up the business is the biggest restructuring in the company’s 24-year history. Jack Ma, who has rarely been seen in public for three years, resurfaced in China this week after a long absence.
Except for the online retail platform Taobao Tmall Commerce Group, which remains Alibaba’s wholly-owned subsidiary, the units will have their own chief executives and boards of directors.
Alibaba Group said in filings with the US Securities and Exchange Commission and the Hong Kong Stock Exchange that the units will unlock value by capturing opportunities in their respective markets and industries.
“The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready,” chief executive Daniel Zhang said in a letter to staff.
A China technology analyst told the BBC that investors are attracted to the restructuring because Alibaba’s business units will be able to grow independently.
She added that each unit will also be more streamlined and “less likely to be subject to antitrust violations”.
According to Scott Kessler, global sector lead at investment research firm Third Bridge, Alibaba’s restructuring follows years of tough regulations for Chinese technology firms.
“Over the past few months, the government has been less harsh on big technology companies. People are wondering if this could be the beginning of a period where the government shifts from being almost an adversary to companies, to actually supporting them,” he added.
This week, Alibaba founder Jack Ma returned to China after spending more than a year overseas, according to the Alibaba-owned South China Morning Post.
As part of a crackdown on technology entrepreneurs, Mr. Ma toured the Yungu School in Hangzhou, the city where Alibaba is headquartered, the newspaper reported.
After criticizing China’s financial regulators in 2020, the 58-year-old stepped down as Alibaba’s chairman in September 2019.
