Chinese e-commerce giant Alibaba has confirmed plans to split into smaller groups to allow each one pursue independent IPO.
Alibaba Group Holding Limited (NYSE: BABA) recently announced plans to split into 6 business units, each capable of pursuing an IPO. According to the Chinese e-commerce giant, the move seeks to “unlock shareholder value and foster market competitiveness.”
The Alibaba IPO-focused split also represents the most significant reorganization in the Hangzhou-based company’s history. Shares of the company jumped more than 9% in US pre-market trading following the announcement.
In the same announcement, Alibaba revealed that each business group would have its chief executive officer and board of directors. By equipping each of the six groups with the ability to generate outside funding and go public, Alibaba seeks to reinvigorate growth. The Asian e-commerce powerhouse has endured a few rough years of slowing economic growth in its home country of China. In addition, the company weathered a sustained period of stringent regulation from the Chinese government, which wiped off billions in its market value.
However, Alibaba’s reorganization comes amid signs that Beijing is looking to revive economic growth in China. The country has reportedly been warming back up to technology businesses, with Alibaba founder Jack Ma back home after months abroad.
Insight into Newly Split Alibaba IPO-focused Business Groups
The six offshoot Alibaba business groups will center around the company’s strategic priorities. These groups include Cloud Intelligence Group, Taobao Tmall Commerce Group, and Local Services Group. Others are Cainiao Smart Logistics, Global Digital Commerce Group, and Digital Media and Entertainment Group.
Alibaba CEO Daniel Zhang will reportedly head the Cloud Intelligence Group, which entails cloud and artificial intelligence activities. Meanwhile, Alibaba’s Taobao Tmall Commerce Group will cater to its online shopping platforms, including Tmall and Taobao. The e-commerce giant further stated that the Local Services Group, headed by Chinese entrepreneur Yu Yongfu, will cover its food delivery service Ele.me and mapping. Cainiao Smart Logistics houses Alibaba’s logistics service and sees business exec Wan Lin continue as CEO.
Alibaba’s Global Digital Commerce Group, headed by Jiang Fan, comprises the company’s international e-commerce businesses, such as AliExpress and Lazada. The 6th business group, Digital Media and Entertainment Group, headed by Fan Luyuan, will constitute Alibaba’s streaming and movie business.
Apart from an IPO, the split allows Alibaba to focus exclusively on each of its service offerings. Over the years, the company has grown into an all-encompassing business that offers e-commerce, streaming, cloud computing, and logistics services. As Zhang explained in a statement:
“This transformation will empower all our businesses to become more agile, enhance decision-making, and enable faster responses to market changes.”
Although each business unit can pursue independent initial public offerings, Taobao Tmall Commerce Group remains wholly owned by Alibaba.
Alibaba Fiscal Q3 2023 Report
Last month, Alibaba published its fiscal Q3 2023 earnings report which surpassed expectations. The company raked in revenue of 247.76 yuan ($35.92 billion) against consensus estimates of 245.18 billion yuan ($35.65 billion).
At the time, Alibaba shares were also up 7% since the beginning of the year.
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