Alibaba Group, one of the world’s largest tech companies, has announced plans to split into six different business groups after operating as one company for 25 years. The Chinese conglomerate, founded by billionaire Jack Ma, will restructure its business into six separate companies, each of which will be independently managed by its own CEO and board of directors. The six business groups are Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics, Global Digital Commerce Group, and Digital Media and Entertainment Group.[0]
The move is being seen as an attempt to unlock shareholder value and foster market competitiveness.[1] Every group will be capable of generating external funds, functioning autonomously, and conceivably becoming publicly traded through IPOs.[2] Five of the new business groups will have the flexibility to raise outside capital and seek their own IPO.[3] By choosing to divide into separate units, each will have its own leadership and executive board, allowing them to independently seek fundraising and IPO opportunities at their own pace.
Alibaba’s restructuring news came a day after the Wall Street Journal reported that Jack Ma had returned to mainland China after spending about a year abroad. At a time when Beijing is seeking to enhance business confidence after enduring COVID-19 restrictions and regulatory crack downs for several years, his comeback is timely.[4] In 2021, reports said that China’s government had asked Alibaba to sell off its collection of media assets.[4]
Chinese tech companies were recently subject to a regulatory crackdown that resulted in significant changes to their operations, including stricter regulations on data usage and enforcement of antitrust laws.[2] As part of the action taken, hefty penalties were imposed on several big tech companies. One such example is Alibaba, which received a fine of $2.8 billion for engaging in anti-competitive business practices. Regulators compelled Ant Group, the fintech subsidiary of Alibaba, to call off its massive public offering in November 2020.[5] As part of an antitrust investigation, Alibaba received a fine of $2.6 billion in 2021.
Analysts believe Alibaba’s reorganization is a sign of Beijing softening its stance on tech giants after the regulatory crackdown that has been taking place since 2020.[6] Jack Ma’s return to public view in China for the first time in months is also seen as an olive branch from Beijing to ease up its scrutiny of the tech sector.
Alibaba’s six new business groups are as follows:
Cloud Intelligence Group: focuses on cloud computing and artificial intelligence technologies.
Taobao Tmall Commerce Group: handles Alibaba’s e-commerce business in China.[0]
Local Services Group: includes Alibaba’s food delivery and online travel businesses.
Cainiao Smart Logistics: runs Alibaba’s logistics and warehouse operations.[0]
Global Digital Commerce Group: focuses on Alibaba’s international e-commerce business.[2]
Digital Media and Entertainment Group: includes Alibaba’s streaming and movie businesses. Film studio Alibaba Pictures, video streamer Youku “and other businesses” will be part of the new entertainment business, dubbed Digital Media and Entertainment Group.
0. “Buy Alibaba Stock Because $130 Is Around the Corner, Says Top Analyst” TipRanks, 29 Mar. 2023, https://www.tipranks.com/news/article/buy-alibaba-stock-because-130-is-around-the-corner-says-top-analyst
1. “After a more than $1 trillion rout, Beijing appears to be warming to Chinese tech giants” CNBC, 30 Mar. 2023, https://www.cnbc.com/2023/03/30/china-tech-beijing-appears-to-relax-scrutiny-of-giants-like-alibaba.html
2. “Alibaba Stock Surges on Reorganization: More Upside Ahead?” Yahoo Finance, 29 Mar. 2023, https://finance.yahoo.com/news/alibaba-stock-surges-reorganization-more-163604879.html
3. “Alibaba will split into six units, reshaping Jack Ma’s business empire” CNN, 28 Mar. 2023, https://www.cnn.com/2023/03/28/tech/alibaba-restructuring-ipos/index.html
4. “Alibaba to Split Into 6 Parts, Including Digital Media and Entertainment Group” Hollywood Reporter, 28 Mar. 2023, https://www.hollywoodreporter.com/business/business-news/alibaba-split-digital-media-entertainment-group-1235362094/
5. “Alibaba to split into 6 units and explore IPOs; shares up 14% in the U.S.” CNBC, 28 Mar. 2023, https://www.cnbc.com/2023/03/28/alibaba-says-it-will-split-into-6-units-that-can-raise-funds-and-ipo.html
6. “Alibaba tells investors its overhaul will make the business more ‘agile’ with market changes” CNBC, 30 Mar. 2023, https://www.cnbc.com/2023/03/30/alibaba-executives-conference-call.html