Alibaba plans big restructuring to boost sagging share price

Alibaba plans to break out units covering logistics, cloud and local services from its main ecommerce business, as the ailing Chinese tech giant carries out an overhaul to try to bolster its sagging share price.

The restructuring and split into six different business units will see Alibaba become a holding group, with each arm led by a separate chief executive and board who will be empowered to bring in outside capital or list publicly, the company said in a statement.

The reorganisation will set Alibaba on a path similar to its ecommerce rival JD.com, which has seen its corporate group retain a controlling stake in a diverse set of businesses. Each unit has gone on to raise outside capital with several already listed in Hong Kong.

The announcement comes just a day after Alibaba founder Jack Ma returned to mainland China, a trip Beijing hopes will boost investor confidence that its rapprochement with the private sector is genuine.

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It was Mr Ma’s speech in Shanghai more than two years ago that set off a broad crackdown on China’s largest tech groups and led to the suspension of Alibaba fintech arm Ant Group’s initial public offering.

Alibaba’s shares have lost more than 70 per cent of their value since then, leaving it with a market capitalisation of about $220 billion (€203 billion). The group’s Hong Kong stock ended Tuesday’s session down more than 1 per cent, but New York-listed shares in Alibaba gained 7.4 per cent in premarket trading following news of the shake-up.

Alibaba’s main moneymaking units – its Taobao and Tmall ecommerce platforms – will remain wholly owned by the corporate group.

“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 employees.

“At 24 years of age, Alibaba is welcoming a new opportunity for growth,” he added.

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Mr Zhang will remain as chief executive and chairman of the Alibaba holding group and head up its struggling cloud business which he took over in December.

Louis Tse, managing director at Hong Kong-based Wealthy Securities, said the intent of the reorganisation and individual listings was to help realise the full value of the group’s different businesses.

“If you spin these off into different listings, you’ll get a higher market value,” Mr Tse said.

A senior manager at Alibaba said that all six business groups had been operating separately for several years and had plans for IPOs in the short term.

“This statement is an open admission of this reality, no more hiding,” said the manager.

Other Wall Street analysts pointed out that the restructuring largely reflected how the group was currently constituted and it remained to be seen if it would unlock any additional value for shareholders.

Robin Zhu of Bernstein said the plan as outlined would leave a lot riding on the timeline for bringing in outside capital, which Alibaba left unclear in its news release. – Copyright The Financial Times Limited 2023