Chinese e-commerce giant Alibaba has confirmed plans to split into smaller groups to allow each to pursue an independent initial public offering.
Alibaba Group Holding Limited (NYSE: BABA) recently announced plans to split into 6 business units, each capable of seeking an initial public offering. According to the Chinese e-commerce giant, the move seeks to “unlock shareholder value and foster market competitiveness.”
Alibaba’s IPO-focused division also represents the biggest shakeup in the Hangzhou-based company’s history. Shares of the company rose more than 9% in US premarket 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 raise external financing and go public, Alibaba seeks to reinvigorate growth. The Asian e-commerce powerhouse has endured some rough years of slowing economic growth in its home country of China. In addition, the company endured a prolonged period of strict regulations by the Chinese government, which wiped out billions in its market value.
However, Alibaba’s shakeup comes amid signs that Beijing is seeking to revive economic growth in China. The country has reportedly been reeling from tech business, with Alibaba founder Jack Ma back home after months abroad.
Information on the newly split Alibaba IPO-focused business groups
Alibaba’s six spin-off business groups will focus on 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 involves cloud and artificial intelligence activities. Meanwhile, Alibaba’s Taobao Tmall Commerce Group will serve its online shopping platforms, including Tmall and Taobao. The e-commerce giant further stated that the Local Services Group, headed by Chinese businessman Yu Yongfu, will cover its food delivery service Ele.me and mapping. Cainiao Smart Logistics houses Alibaba’s logistics service and sees business executive 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 sixth business group, Digital Media and Entertainment Group, headed by Fan Luyuan, will form Alibaba’s movie and streaming business.
Aside from an initial public offering, the split allows Alibaba to focus exclusively on each of its service offerings. Over the years, the company has grown into a comprehensive business offering e-commerce, streaming, cloud computing, and logistics services. As Zhang explained in a statement:
“This transformation will enable all of our businesses to become more agile, improve decision making, and enable faster responses to market changes.”
Although each business unit can conduct independent initial public offerings, Taobao Tmall Commerce Group remains wholly owned by Alibaba.
Alibaba’s Fiscal 2023 Third Quarter Report
Last month, Alibaba released its fiscal 2023 third-quarter earnings report that beat expectations. The company posted revenue of 247.76 yuan ($35.92 billion) against consensus estimates of 245.18 billion yuan ($35.65 billion).
At the time, Alibaba’s shares were also up 7% since the beginning of the year.
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Tolu is a Lagos-based blockchain and cryptocurrency enthusiast. He likes to demystify the crypto stories down to the basics so that anyone anywhere can understand them without too much prior knowledge. When he’s not up to his neck in crypto-stories, Tolu likes music, loves to sing, and is an avid movie buff.
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