Historic decision for Alibaba. The Chinese e-commerce giant will split into 6 unit separate each with the ability to raise external funding e be listed on the Stock Exchange. Each division will be managed by its own chief executive officer and board of directors. On Wall Street the title immediately benefited from the news: in the pre-market it flew by more than 10%. But at the start the stock dropped 1,17%.
Alibaba's announcement coincided with the return of its billionaire co-founder Jack Ma in China after more than a year abroad and as Beijing tries to spur private sector growth after a Xi Jinping administration crackdown on internet spheres that has wiped out more than $500 billion of its value.
Alibaba: the objectives of the historic restructuring
This is a departure from the company's traditional preference of keeping most of its operations under the main Alibaba umbrella. But it's also a strong signal that the giant is ready to tap into investors and public markets.
In fact, the last few years have been complicated for the company founded by Jack Ma. The Covid-19 pandemic, the strict rules of the Chinese government, the global crisis, not to mention the tug of war with the Antitrust that two years ago fined the multinational with a penalty of 2,8 billion dollars for violating Chinese antitrust rules.
Alibaba's move is "designed to unlock shareholder value and promote market competitiveness," the company said in a statement. The market "is the best lifeline and each business group and company will be able to pursue the fundraising and IPO independently when it's ready," she explained in a letter to employees. Daniel Zhang, CEO and president of Alibaba adding that “this transformation will enable all of our companies to become more agile, improve decision-making and respond more quickly to market changes”.
Alibaba, here is the new composition
The Chinese e-commerce conglomerate said the biggest restructuring in its 24-year history will see it split into 6 units: Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group e Digital Media and Entertainment Group. Each will be managed by its own chief executive officer and board of directors and will retain the flexibility to raise external capital and seek an initial public offering.
Zhang will remain head of Cloud intelligence, confirming the centrality of the IT sector in corporate strategies with the growing role of artificial intelligence in e-commerce. Not only that, he will also continue to serve as chairman and CEO of Alibaba Group, which will be run as a holding company. As for other sectors, the former head of international retail sales, Jiang Fan, will head the Global digital commerce, while the longtime manager Trudy Come on will have the main online division Taobao Tmall which will remain (the only) wholly owned unit of Alibaba Group.
Zhang also stated that the company will "lighten and trim" its middle and back office functions, without specifying the job cuts.
