Alibaba has announced plans to split into six units and is considering an IPO or capital raise for most of them. It would be the largest restructuring in the history of the tech conglomerate. The group’s shares rose 16.3% in Hong Kong and 14.3% in the United States.
Splitting the company is Alibaba’s decision, says Chinese tech expert Ed Sander. “Since the company went public in 2014, it has grown so large that it has become very unwieldy and slow. They have gone from 25,000 employees to no less than 250,000′.
China’s unprecedented crackdown on major domestic companies has weighed on investor sentiment and led to billions in losses in market value. ‘The company has been dealt with harshly, with anti-monopoly legislation. Even CEO Jack Ma himself has been addressed because he has become critical of financial regulators. As a result, he disappeared from the radar for a while.’ Alibaba’s restructuring is expected to lead to better relations with Chinese regulators and policy makers.
Agile companies
Alibaba will split into six units, five of which are expected to go public, while Taobao and Tmall will remain the main sources of revenue and remain with the current listed entity. ‘Because those companies will soon be much more agile, because they can make important decisions on their own, they will be better able to compete with other companies in China. For the consumer it also means that the products can be significantly improved,’ says Sander.