The group wants to split into individual companies for online trading and cloud business, among other things.
(Photo: Reuters)
Beijing China’s largest tech group Alibaba wants to split its business into six independently managed parts of the company. Separate IPOs of the units are possible, as stated in a statement on Tuesday. This would make Alibaba itself a pure holding company. The Hong Kong newspaper South China Morning Post, which belongs to Alibaba, first reported.
The restructuring that has now been decided is the largest restructuring in the 24-year history of the group, with annual sales of more than 130 billion dollars. The move serves to enable the business units to “become more agile,” said Alibaba CEO Daniel Zhang in a letter to employees, according to media reports. This should revitalize the entrepreneurial spirit.
Zhang also announced a downsizing of the administration, but gave no details about job cuts. The planned restructuring has no effect on the stock exchange listings in New York and Hong Kong.
Alibaba split: stock market reacts positively
The largest of the six units is the e-commerce business with the Taobao and Tmall platforms, which account for almost 70 percent of the group’s sales. Also important is the cloud computing segment, the fastest growing area. The other parts of the company are local services, logistics and entertainment. In addition to the holding company, Zhang will also run the cloud business.
The plans were well received on the stock market. The company’s stocks traded in the United States rose by more than 12 percent on Tuesday.
With the restructuring, Alibaba is following the example of Google, which carried out a similar restructuring in 2015 under the umbrella of the Alphabet holding company. It was initially unclear to what extent the step is also a reaction to the wave of regulations in China in recent years. This had also hit Alibaba hard.
Alibaba founder Ma back in China
On Monday, Alibaba founder Jack Ma was spotted in mainland China for the first time in a year. In the past two years, the billionaire had mostly stayed abroad and lived in Japan, among other places. Ma, formerly known for his outspoken public appearances, had criticized conservative regulation in the financial sector as a “pawn shop mentality” in the fall of 2020.
The authorities then banned the $24.5 billion mega IPO of the financial services subsidiary Ant. In addition, the Chinese competition authorities imposed a record fine of 18.2 billion yuan, the equivalent of around 2.3 billion euros, on the parent company Alibaba because it had lost its dominant market position have exploited position.
The Alibaba founder has been seen in China for the first time in years.
(Photo: AP)
A so-called “rectification campaign” in China’s tech sector ensued. Companies like Alibaba, Baidu and Tencent had grown into powerful conglomerates here, largely unregulated.
In the past two years, however, the supervisors have significantly curtailed the market power of the corporations, officially to protect customers and protect competition. Unofficially, however, it was also about increasing the control of the ruling Communist Party over the sector and bringing it into line politically.
>> Read also: China’s government is giving tech companies more leeway again
Recently there have been increasing indications of an end to the wave of regulations. This is probably also related to the fact that the Chinese economy is not recovering from the corona chaos as quickly as hoped.
Sign of the all-clear for China’s tech sector?
Ma’s public appearance in Hangzhou, where Alibaba is also based, sparked speculation as to whether this could be interpreted as a sign of the all-clear for the private sector. The new Chinese Prime Minister Li Qiang has been using intermediaries to persuade the Alibaba co-founder to return to China since last year, reports the Reuters news agency, citing insiders. However, it is unclear whether this is the reason for the current trip.
Ma announced earlier this year that it would relinquish control of Ant. Shortly thereafter, financial regulators signaled that regulatory efforts were “nearly complete” at a dozen or so financial affiliates of the tech companies, including Ant. Ant, which owns the popular online payment app Alipay, previously spun off its highly profitable consumer credit business after pressure from the authorities.
As the renowned Chinese business magazine “Caixin” reports, the connections to the parent company Alibaba have been severed to a large extent, including data exchange. The wave of regulations has cost Ma himself dearly. He lost his top position as the richest Chinese.
More: Alibaba founder Jack Ma is back in China