Alibaba shares up 14% in U.S. after announcing plans to divide into six parts

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Alibaba Announces Significant Restructuring Plan

On Tuesday, 28th March, Chinese e-commerce giant Alibaba announced a major restructuring plan that will divide the company into six independent business groups. This move marks the most significant reorganization in the company’s history and will allow each group to raise external funding and pursue public listings independently, except for Taobao Tmall Commerce Group, which will remain wholly-owned by Alibaba.

Meet the Six New Business Groups of Alibaba

The six business groups are as follows:

  • Cloud Intelligence Group: This business group will be headed by Alibaba CEO Daniel Zhang and will house the company’s cloud and artificial intelligence activities.
  • Taobao Tmall Commerce Group: This business group will cover Alibaba’s online shopping platforms, including Taobao and Tmall. It will remain wholly owned by Alibaba.
  • Local Services Group: This business group will be headed by Yu Yongfu and will cover Alibaba’s food delivery service Ele.me as well as its mapping.
  • Cainiao Smart Logistics: This business group will continue to be headed by Wan Lin and will house Alibaba’s logistics service.
  • Global Digital Commerce Group: This business group will be headed by Jiang Fan and will include Alibaba’s international e-commerce businesses, including AliExpress and Lazada.
  • Digital Media and Entertainment Group: This business group will be headed by Fan Luyuan and will include Alibaba’s streaming and movie business.

Each Business Group Can Pursue Independent Fundraising and Public Listings

According to Alibaba CEO Daniel Zhang, each of the six new business groups will be able to pursue independent fundraising and a public listing when they are ready, with the exception of Taobao Tmall Commerce Group, which will remain wholly owned by Alibaba. This is a significant development for Alibaba, as it will allow each group to operate more autonomously and to pursue growth opportunities more aggressively.

Alibaba’s Recent History and Regulatory Pressures

Alibaba’s restructuring plan comes at a time when the company has faced significant regulatory pressures in China. In 2020, Ant Group, a financial affiliate of Alibaba founded by Jack Ma, was forced to pull its $37 billion IPO at the last minute following a speech from Ma in which he criticized China’s banks and financial regulators.

Also Read: From English Teacher to Billionaire: The Journey of Jack Ma, Founder of Alibaba

The next year, Alibaba was hit with a record fine from China’s antitrust regulators. As a result of these pressures, Alibaba’s shares suffered a steep decline, losing roughly 75% of its market value between its peak in October 2020 and the same month two years later.

Positive Market Response to Alibaba’s Restructuring Plan

However, in 2021, there has been a shift in sentiment towards Alibaba, and the company’s shares have seen a significant increase in value following the announcement of its restructuring plan. On Tuesday, 28th March, Alibaba’s shares gained more than 14% in New York and were more than 13% higher in Hong Kong on Wednesday, 29th March. This positive market response suggests that investors are optimistic about Alibaba’s future under the new restructuring plan.

Jack Ma’s Recent Public Appearance and Past Criticisms

The announcement of Alibaba’s restructuring plan comes just a day after Jack Ma made a rare public appearance in China. Ma visited the Alibaba-funded Yungu School in Hangzhou, where he discussed the future of education with the campus directors. Ma has kept a low profile in recent years, following his past criticisms of China’s financial regulators, which some believe contributed to the regulatory pressures faced by Alibaba and its affiliates. However, Ma’s recent public appearance and Alibaba’s new restructuring plan suggest that the company is moving forward with a new vision for its future.

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