Alibaba Group, the Chinese e-commerce conglomerate, announced plans to split into six business units and consider fundraising or listings for most of them. This major restructuring, the biggest in the company’s 24-year history, aims to make the organization more agile, shorten decision-making links, and respond faster to the rapidly changing market. The six business groups are Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group, and Digital Media and Entertainment Group. Each business will have a CEO and a board of directors and will retain the flexibility to raise outside capital and seek an initial public offering. The exception is Taobao Tmall Commerce Group, which will remain a wholly owned unit of Alibaba Group.
The restructuring is expected to ease regulatory scrutiny over the tech giant, which has been a target of regulators for years. It could also allay concerns that Alibaba had lost its potential to grow. The company’s US-listed shares rose more than 14%, following the announcement of the restructuring. The revamp comes as China vows to ease its sweeping regulatory crackdown and support its private enterprises.
The restructuring is also among the biggest corporate moves by a major Chinese tech company in recent years, as the industry cowered under tighter regulatory oversight, causing deals to dry up and dampening risk appetite among businesses. However, authorities have been softening their tone towards the private sector as leaders try to shore up an economy battered by three years of strict COVID-19 curbs.
Alibaba’s CEO, Daniel Zhang, said each business group had to tackle the rapid changes in the market and each Alibaba employee had to “return to the mindset of an entrepreneur.” Zhang will continue as chairman and CEO of Alibaba Group, which will follow a holding company management model and also serve as CEO of Cloud Intelligence Group. The company would “lighten and thin” its middle and back office functions, but did not detail job cuts.
The decision to split could also be partly a fallout of the US scrutiny of Chinese tech firms that raised national security concerns over TikTok and its parent ByteDance. By paving the way for Alibaba’s various new units to list, the Chinese government may be signaling less hostility towards its tech giants as a placatory message to US and international investors. The restructuring could inject an element of flexibility and adaptability into the company, which currently is something of a behemoth, said Stuart Cole, a head macroeconomist at brokerage Equity Capital.
The company’s founder, Jack Ma, returned home from a year-long stay abroad, a move that dovetailed with Beijing’s effort to spur growth in the private sector after two years of the crackdown. His return could help boost business confidence among entrepreneurs. Since late last year, China’s new premier, Li Qiang, had recognized Ma’s return to the mainland could help boost business confidence among entrepreneurs and had begun asking him to come back.
