Alibaba is shaking things up! The e-commerce giant plans to split into six units and explore IPOs, in a major restructuring move. Find out more here.
In a significant revamp, Alibaba Group has announced its plans to split into six units and explore listings or fundraising for most of them. This restructuring will be the largest in Alibaba’s 24-year history and comes amid Beijing’s push to ease regulatory crackdown and support private enterprises.
The announcement followed Alibaba’s co-founder Jack Ma’s return to China after a year-long absence, while the company faces regulatory headwinds that have caused its shares to tumble 70% since late 2020.
6 UNITS OF THE RESTRUCTURED ALIBABA GROUP
The Chinese e-commerce giant will separate into six units, including Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group, and Digital Media and Entertainment Group.
Each of these six business groups will be headed by its own CEO and board of directors. The Taobao Tmall Commerce Group will remain a wholly-owned unit of Alibaba Group, responsible for its China commerce businesses.
A NEW HOLDING COMPANY MANAGEMENT MODEL
The restructuring will see Alibaba Group follow a holding company management model, with Daniel Zhang continuing to serve as the Chairman and CEO of Alibaba Group while concurrently being the CEO of Cloud Intelligence Group.
According to a letter from Zhang to the staff seen by Reuters, the aim of the restructuring is to make the organization more agile and shorten decision-making links.
IMPACT OF THE RESTRUCTURING ON INVESTORS AND REGULATORS
Investors have responded positively to the restructuring, with Alibaba’s U.S.-listed shares rising by as much as 8% following the news. Analysts believe that the restructuring will release additional value, increase investor confidence and reduce worries about regulatory issues.
This restructuring is one of the most significant corporate moves by a major Chinese tech company, which has been struggling to cope with the tightening regulatory oversight in recent years.
As Beijing tries to spur the private sector’s growth after a two-year-long regulatory crackdown on its private enterprises, this restructuring comes as a sign of a potential new round of development for the business. According to sources with knowledge of the matter, Ma’s return to China could also help boost business confidence among entrepreneurs.
Alibaba Group’s plans to restructure and split into six units are aimed at adapting to the rapidly changing market and improving the organization’s agility. As Beijing’s regulatory crackdown eases and with Ma’s return to China, this restructuring is expected to release additional value, increasing investor confidence and reducing regulatory concerns. With the company’s stock down around 70% since the regulatory crackdown started in late 2020, this is an attempt to revive Alibaba’s growth potential and signal regulatory worries clearing.
(With inputs from Hindustantimes)
A: Alibaba Group plans to split into six units and explore fundraisings or listings for most of them.
A: Alibaba is restructuring its business to make the organization more agile, shorten decision-making links, and respond faster.
A: Daniel Zhang will continue to serve as chairman and CEO of Alibaba Group.
A: Yes, each of the six business groups will be managed by its own CEO and board of directors.
A: Yes, Taobao Tmall Commerce Group will remain an Alibaba Group wholly-owned unit.
A: Zhang said that the company would “lighten and thin” its middle and back office functions, but did not detail job cuts.
A: Alibaba’s shares received a boost after the company’s founder, Jack Ma, returned to China after a year-long stay abroad.
A: Jack Ma’s return to China could help boost business confidence among entrepreneurs and signals regulatory worries clearing.
A: Investors said the announcement stems from concerns Alibaba had lost growth potential and signals regulatory worries clearing.