China's Alibaba to split into six business groups
Image credit: Alibaba
The Chinese e-commerce giant has announced it will break itself up into six business groups, each with the ability to pursue initial public offering (IPO) options and raise external funding.
Alibaba Group will reorganise itself into six separate companies in what has been described as "the most significant governance overhaul" in the platform company’s 24-year history.
The Hangzhou-based firm is one of China's most prominent tech giants, with business operations spanning cloud computing, e-commerce, logistics, media and entertainment, and artificial intelligence.
The decision to split it was therefore said to have been made to unlock shareholder value and foster market competitiveness.
Following the breakup, Daniel Zhang will continue to serve as chairman and CEO of Alibaba Group, which will follow a holding company management model, while each of the six business groups will be managed by a separate CEO and board of directors, the company has revealed.
The six new groups will be made up of the Cloud Intelligence Group, Taobao Tmall Business Group, Local Services Group, Global Digital Business Group, Cainiao Smart Logistics, and Digital Media and Entertainment Group.
“The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready,” Zhang wrote in an email to Alibaba employees.
The only exception to Zhang's statement is the Taobao Tmall Commerce Group, which will remain wholly owned by Alibaba.
The announcement has been perceived as an attempt to turn the company's fate around, as the e-commerce giant had faced a tough couple of years due to slowing economic growth in China, tougher regulation from Beijing, and a failed attempt at a US IPO.
“This transformation will empower all our businesses to become more agile, enhance decision-making, and enable faster responses to market changes,” Zhang said in a statement.
In November 2020, Alibaba’s fintech affiliate Ant Group was forced by regulators to cancel its mega-public listing in November 2020. The following year, Alibaba was fined $2.6bn (£2.1bn) as part of an antitrust probe.
Since the company's share price peaked in October 2020, the company's US-listed shares have fallen by almost 70 per cent, whipping $600bn (£486bn) off its value.
However, following today's announcement, shares of Alibaba Group Holding Ltd jumped 14 per cent on the New York Stock Exchange.
The news also follows reports that Alibaba's founder Jack Ma had returned to China after an absence of over a year. The 58-year-old has kept a low profile since criticising China's financial regulators in 2020 and stepping down as the chairman of Alibaba in September 2019.
In the last few years, Beijing has been firming its grip on internet platforms, citing the risk of abusing market power to stifle competition, misuse of consumers’ information, and violation of consumer rights, in a reversal after years of a more laissez-faire approach.
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