Alibaba (BABA) to reportedly split into six units that may pursue IPOs; Shares gain

(Updated - March 28, 2023 11:55 AM EDT)

New York-listed shares of Alibaba (NYSE: BABA) are trading over 10% higher Tuesday after Bloomberg News reported the company is planning to divide its business into six new units in a bid to boost its flagging share price.

Each of the separate businesses may seek initial public offerings (IPOs) “when the time is right,” according to the report. Alibaba’s core business remains e-commerce, although the firm has also made great progress with its cloud and media businesses.

“Each business group and company can pursue independent fundraising and IPOs when they are ready,” Alibaba’s CEO Daniel Zhang said in a statement to Bloomberg.

Zhang will reportedly be in charge of the cloud intelligence division, which shows the importance of the cloud and AI for the Chinese tech giant.

Jiang Fan, who used to be the international retail chief at Alibaba, is lined up to head up the digital business unit while senior executive Trudy Dai is seen as the head of the new Taobao Tmall online shopping division.

In a note to clients, analysts at Citi said that while they foresaw the possibility that Alibaba could decide to spin off certain parts of the group, Tuesday's announcement marked an "earlier-than-expected" surprise.

"[W]e believe the consideration of business unit restructuring might have been undergoing for some time," the Citi analysts said.

"While it might still take some time for each business unit to go through the separate fund-raising activities, and whether the holding group will retain the consolidated stake or de-consolidated stake of the business unit post the separate listing remain unclear, we believe investors will reassess the valuation of each business unit."

Shares in Alibaba have shed more than 70% of their value since founder Jack Ma gave a speech in November 2020 sounding off against regulators and banks in China. A planned blockbuster $37 billion listing of fintech firm Ant Financial, an affiliate of Alibaba that runs the world's largest mobile payment platform Alipay, was scrapped following the comments. Officials in Beijing also subsequently initiated a broader crackdown on China's most influential tech businesses.

Ma, who has spent much of his time outside of the country in the wake of the controversy, returned earlier this week to mainland China for a visit to a school in Hangzhou, his hometown and the site of Alibaba's headquarters.

Analysts at Edmond de Rothschild Asset Management said Ma's public reappearance should help bolster the perception that Chinese officials are "refocus[ing] on growth."

By Senad Karaahmetovic and Scott Kanowsky

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