Alibaba plans big restructure to boost sagging share price

Alibaba is planning a radical shake up to split off its logistics, cloud and local services from its main ecommerce business in a bid to bolster the ailing Chinese tech giant’s share price.

The reorganisation will turn Alibaba into a holding group, with each of its six business units led by a separate chief executive and board empowered to bring in outside capital or list publicly, the company said.

“The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready,” chief executive Daniel Zhang said in a letter to employees.

“At 24 years of age, Alibaba is welcoming a new opportunity for growth,” he added.

The group has suffered a difficult past two years, during which it has had to contend with a record $2.8bn fine by Beijing regulators for monopolistic behaviour, as well as stuttering Chinese economic growth and a rush of new competitors.

Zhang will remain as chief executive and chair of the Alibaba holding group and head up its struggling cloud business which he took over in December.

Alibaba’s main moneymaking units — its Taobao and Tmall ecommerce platforms — will remain wholly owned by the main company.

Louis Tse, managing director at Hong Kong-based Wealthy Securities, said the reorganisation was likely to help realise the full value of the group’s different businesses.

“If you spin these off into different listings, you’ll get a higher market value,” Tse said.

The break-up will set Alibaba on a similar path to its ecommerce rival JD.com, which has retained a controlling stake in a diverse set of businesses. Each unit has gone on to raise outside capital with several already listed in Hong Kong.

Alibaba’s announcement comes just a day after founder Jack Ma returned to mainland China, a trip Beijing hopes will boost investor confidence that its rapprochement with the private sector is genuine.

A speech by Ma in Shanghai more than two years ago set off a broad crackdown on China’s largest tech groups and led to the suspension of Alibaba fintech arm Ant Group’s initial public offering.

Alibaba’s shares have lost more than 70 per cent of their value since then, leaving it with a market capitalisation of about $220bn. The group’s Hong Kong stock ended Tuesday’s session down more than 1 per cent, but New York-listed shares in Alibaba gained 7.4 per cent in premarket trading following news of the shake-up.

A senior manager at Alibaba said that all six business groups had been operating separately for several years and had plans for IPOs in the short term.

“This statement is an open admission of this reality, no more hiding,” said the manager.

0Robin Zhu of Bernstein said the plan would leave a lot riding on the timeline for bringing in outside capital, which Alibaba left unclear in its news release.

Additional reporting by Cheng Leng and Edward White