Alibaba to split into six units, each to pursue independent IPOs

In a historic top to bottom corporate restructuring, Chinese tech giant Alibaba Group Holding Ltd is splitting the business into six divisions of differing sizes with the intention to “unlock shareholder value and foster market competitiveness.”

Alibaba Group has a current market capitalization of US$228 billion. The new restructuring means that each unit will have its own CEO, a board of directors, flexibility to raise outside capital and launch independent IPOs in the future, said chairman and CEO of the Alibaba Group, Daniel Zhang, in an internal letter to employees.

The independent units include the cloud intelligence group, Taobao Tmall commerce, local services, Cainiao smart logistics, global digital commerce and digital media and entertainment. Zhang will continue to helm as chairman and CEO of the larger Group, which will now follow a holding company management model. Zhang will also be the CEO of the cloud intelligence unit.

Interestingly, Alibaba’s biggest restructuring in its 24-year history was unveiled a day after Jack Ma made a rare public appearance at a school in Hangzhou. Ma, once an flamboyant billionaire, stepped down as CEO of Alibaba in 2013, retired from his role as executive chairman in 2019, and has kept a low profile in the last two years since the Chinese government started to tighten its screws on the tech sector.

Alibaba founder Jack Ma, seen visiting Hangzhou Yungu School in Hangzhou, Zhejiang province. Photo: Hangzhou Yungu School/Reuters

In November 2020, Alibaba's financial arm, Ant Group, was forced to scrap its IPO worth US$37 billion following a bold speech by Ma, who publicly criticised China's banking and financial regulatory system. But that was not the end of the ecommerce giant's woes, as China's antitrust watchdog imposed an unprecedented fine on Alibaba the following year.

These events led to a steep decline in Alibaba's shares, with the company's market value tumbling by 75% from its peak in October 2020 to the same month two years later. It was a severe blow to one of China's most prominent and influential tech firms.

But this year, in a shift of sentiment, Ant Group received a crucial approval for expanding its consumer finance division's capital this year, signalling a positive, more business-friendly approach on Beijing’s part.

Currently Alibaba has its shares and ADR shares listed in Hong Kong and New York. Some parts of its media business like Alibaba Pictures also have their own Hong Kong share listing.   

“This transformation will empower all our businesses to become more agile, enhance decision-making, and enable faster responses to market changes,” said Zhang in a letter to employees and shareholders. The move reverses the centralisation drive which Ma’s envisioned for the company before his exit in 2019 in which he sought to bring the various subsidiaries and affiliates in tighter alignment, part of the so-called Alibaba Economy.