A split in time saves Alibaba
How much the stock price of Alibaba soared after the split announcement?
Alibaba announced on Mar 28, 2023, that it is planning to split its business into six separate units. These units are expected to undergo fundraising and IPO’s. This restructuring comes in as China is looking forward to ease its regulatory laws and support various private businesses. The six units post-split will be Cloud Intelligence Group, Local Services Group, Taobao Tmall Commerce Group, Cainiao Smart Logistics Group, Global Digital Commerce Group and Digital Media and Entertainment Group. Alibaba’s Chief Executive Daniel Zhang said in a letter to staff “The original intention and fundamental purpose of this reform is to make our organisation more agile, shorten decision making links and respond faster”.
This move is expected to bring down the amount of scrutiny posed by the regulators on the tech-giant with diversified businesses. Post-split, each unit will have a CEO and a board of directors and will be looking forward to raising capital and listing the units. However, the Taobao Tmall Commerce Group, responsible for China commerce group will continue to be a wholly owned unit of Alibaba Group. The split will simplify Alibaba’s business and reduce the number of regulatory sanctions posed on the company.
Alibaba had lost almost $600bn from its all-time high in Oct 2020 due to the continued sanctions of the Chinese regulatory authorities. On the contrary, the shares of Alibaba surged 15% at the open on Mar 29, 2023, mainly due to split announcement. Another major catalyst was the return of Jack Ma to China. The overseas stay of Jack Ma had led to a decline in confidence among private businesses, whereas, his return is seen as a positive signal. Other tech stocks also soared during the session and the Hang Seng Tech index rose by 3.3%.
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