China tech giant Alibaba to split, pursue IPOs

Chinese e-commerce giant Alibaba said Tuesday it will reorganize its business into six separate companies – a sweeping overhaul unveiled as Beijing authorities show signs of easing their regulatory crackdown on the country’s tech sector.

Alibaba’s action was announced just one day after the company’s high-profile founder, billionaire Jack Ma, returned to mainland China after spending nearly a year abroad – though people inside the company told the Wall Street Journal the move was unrelated.

Alibaba said each of the six entities “will be managed by its own CEO and board of directors.”

The entity described the restructuring as “the most significant governance overhaul” in the company’s history.

“The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready,” Alibaba Group Chairman Daniel Zhang said in an email to employees.

Alibaba’s US-listed shares rose nearly 9% after the announcement.

The stock is down about 70% from its peak in late 2020 as China’s tech crackdown progressed.

Both Alibaba’s announcement and Ma’s return came as Beijing attempts to reignite confidence in China’s approach to business.

The country’s economy has suffered in the wake of a significant regulatory crackdown and draconian “COVID zero” lockdowns that sapped productivity for many domestic companies.

A recent state-sponsored China Development Forum touted business growth in the country and featured an appearance from Apple CEO Tim Cook, among other leaders.

The move to split Alibaba’s operations addressing a key concern of officials from the Chinese Communist Party, who had raised concerns about the rising power and influence of the e-commerce firm, fellow tech giant Tencent and other notable tech firms, according to Bloomberg.

“It is one step in the direction with China’s policy to reduce the monopolistic nature of the tech giants,” Bloomberg Intelligence analyst Marvin Chen told the outlet.

“While China tech spinoffs are not uncommon, the move looks to be more encompassing, including core businesses, that may serve as a blueprint for the industry going forward,” Chen added.

Ma had notably kept a low profile during the regulatory clampdown, spending time in Japan and other countries while reportedly ceding control of his companies to younger executives.

In 2020, China nixed a planned $37 billion initial public offering for Ma’s Ant Group, an affiliate of Alibaba Group, after the billionaire was publicly critical of regulators.

Ma has a personal net worth of $32.5 billion, according to the Bloomberg Billionaires Index.

The six business units set to be spun off were identified as Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics, Global Digital Commerce Group and Digital media and Entertainment Group.

Taobao Tmall Commerce Group, the unit responsible for China-based e-commerce operations, will remain a wholly owned subsidiary of Alibaba.

“It does seem something of a coincidence that this is happening just as Ma seems comfortable returning,” Stuart Cole, head macro economist at brokerage Equiti Capital told Reuters.

“To me it suggests something that Alibaba has been wanting to do for some time, but has been waiting for the opportunity to do so,” Cole added.

With Post wires