Chinese E-Commerce Giant Alibaba Announces Split Of Its $220 Billion Empire A Day After Jack Ma Returns

Chinese e-commerce giant Alibaba Group is planning to split its mammoth $220 billion empire into six units and explore fundraising or listing for most of them, it said on Tuesday.

This is a major revamp for the company at a time when China has vowed to ease regulatory crackdowns and support its private enterprises.

Alibaba's Shares Jump 14% After Announcement

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The U.S.-listed shares of Alibaba, which have lost nearly 70% of their value since the curbs were imposed in late 2020, rose more than 14% yesterday on the NYSE after the announcement.

Alibaba said the biggest restructuring in its 24-year history would see it split into six units: Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group, and Digital Media and Entertainment Group, as per a Reuters report.

The big announcement comes just a day after Alibaba 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 crackdown.

Analysts said the split could ease scrutiny over Alibaba, whose sprawling business has been a target of regulators for years.

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Reason Behind The Big Split

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"The original intention and fundamental purpose of this reform is to make our organisation more agile, shorten decision-making links, and respond faster," Chief Executive Daniel Zhang said in a letter to staff, which was seen by Reuters.

Each business group, he said, 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. Each of the six businesses will have a CEO as well as a board of directors and will retain the flexibility to raise outside capital and seek an initial public offering, the company said, as per the report.

The exception would be Taobao Tmall Commerce Group, which handles China commerce businesses and will remain a wholly owned unit of Alibaba Group. The company would "lighten and thin" its middle and back office functions, Zhang said. But he did not detail any job cuts.

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Jack Ma's Return To China

Reuters

The restructuring announcement is among the biggest corporate moves by a major Chinese tech company in recent years. Alibaba's shares received a boost on Monday as well after founder Ma returned to China. His overseas stay was viewed by the industry as a reflection of the sober mood of its private businesses.

China's 8th Premier of the State Council, Li Qiang, recognised Jack Ma's return to the mainland as a boost to business confidence among entrepreneurs. In 2019, Alibaba founder Jack Ma stepped down as its head.

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