The Chinese online retail giant Alibaba wants to split itself into six independent companies. This would transform the now monolithic tech giant Alibaba into a tech holding company, which is rare in China.
On Tuesday, the company said that the move envisions the online retail, media, and cloud divisions considering corporate actions or IPOs at the appropriate time. The other divisions would be local services, logistics and entertainment. Each company will have its chief executive officer and board of directors. Hovering over everything as a holding company would be Alibaba Group, headed by Daniel Zhang. He will also be the head of the Cloud Intelligence Group.
The move is likely to be a signal that Alibaba is prepared to raise money on the capital market in the long term after the Chinese government cracked down on Internet companies in some cases in recent years. Most recently, the pressure here had eased somewhat.
“The intention and fundamental purpose of this reform are to make our organization more flexible, shorten decision-making paths and respond more quickly,” Group CEO Zhang wrote in an employee newsletter on Tuesday. He called on employees to return to “an entrepreneurial mindset.” He also announced a thinning of administrative staff but gave no details on job cuts.
The plans were well received on the stock market. U.S.-listed Alibaba shares rose more than six per cent in premarket trading. “This brings an element of flexibility and adaptability to a company that is a behemoth right now,” said Stuart Cole, chief economist at brokerage Equiti Capital. However, he said it would undoubtedly take quite a while to turn one company into six.
The split announcement came a day after Alibaba co-founder Jack Ma was spotted in China for the first time in years. That isn’t a coincidence, economist Cole commented. “It suggests that Alibaba has been nursing this plan for some time and waiting for an opportune time.”