A day after group founder Jack Ma returned to China, Alibaba Group announced the largest restructuring in its 24-year history, dividing the company into six groups.
Alibaba Group wants to split into six entities and investigate fundraising or listing opportunities for the majority of them, the company announced on Tuesday, in a dramatic restructuring as Beijing pledges to soften a broad regulatory crackdown and assist its private firms.
After the news, Alibaba’s US-listed shares soared as much as 8%. Since the regulatory crackdown began in late 2020, Alibaba’s stock has dropped by around 70%.
The Chinese e-commerce conglomerate said it would split into six units in the largest restructuring in its 24-year history: Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group, and Digital Media and Entertainment Group.
The makeover of the company comes a day after its founder, Jack Ma, came home after a year overseas, and as Beijing seeks to stimulate private sector development following a two-year regulatory crackdown on its flagship private firms.
“The original intention and fundamental purpose of this reform is to make our organization more agile, shorten decision-making links, and respond faster,” Zhang said in a letter to staff seen by Reuters.
Each business group, he said, had to actively tackle the rapid changes in the market and each Alibaba employee had to “return to the mindset of an entrepreneur.”
Daniel Zhang will continue to serve as chairman and CEO of Alibaba Group, which will be managed under a holding company style, as well as CEO of Cloud Intelligence Group.
Each of the six business units will be overseen by its own CEO and board of directors and will be able to attract outside cash and seek an initial public offering, according to the company.
Taobao Tmall Commerce Group, which handles its Chinese commerce operations, will remain an Alibaba Group fully owned subsidiary.
Zhang also stated that the corporation will “lighten and thin” its middle and back office activities, although no specific job layoffs were announced.
Investors believe the statement addresses fears that Alibaba has lost growth potential and indications that regulatory issues had been alleviated.
“It adds value,” said Kenny Ng, a strategist at China Everbright Securities in Hong Kong.
“With this anticipation, investors will be more optimistic about Alibaba. “It may indicate a new phase of development for the firm and alleviate regulatory concerns.”
The reform is one of the most significant corporate adjustments undertaken by a large Chinese IT company in recent years, as the industry has cowered under stricter governmental supervision, forcing transactions to dry up and organizations’ willingness to explore new areas to dwindle.
Authorities have been softer on the private sector in recent months as authorities sought to prop up an economy devastated by three years of COVID-19 restraints. Businesses, on the other hand, have been reticent, citing a lack of new supporting policies and the new regulatory structure as reasons.
Alibaba’s stock rose on Monday after the company’s founder, Jack Ma, was seen returning to China, after a more than a year-long absence that the industry saw as representing the company’s gloomy attitude.
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