Alibaba shares soar 15% in Hong Kong following major overhaul announcement


Display at the offices of Alibaba Group Holding Ltd. in Beijing, China on Tuesday, January 17, 2023.

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Hong Kong listed shares of Ali Baba jumped 15% at the opening on Wednesday after the company announced a major overhaul to split the tech giant into six business groups.

On Wall Street overnight, shares of Alibaba soared to close up 14.26%. They were 0.71% higher in after-hours trading.

The decision to split into different units means each will be run by its own management and board, and can pursue independent fundraising and IPOs when ready.

The company said the move was to “unleash shareholder value.”

The six activity groups are:

  • Cloud Intelligence Group: includes the company’s cloud and artificial intelligence businesses;
  • Taobao Tmall Commerce Group: online shopping platforms, including Taobao and Tmall;
  • Local Service Group: covers Alibaba’s food delivery service and its mapping;
  • Cainiao Smart Logistics: houses Alibaba’s logistics department;
  • Global Digital Commerce Group: includes Alibaba’s international e-commerce businesses, including AliExpress and Lazada;
  • Digital Media and Entertainment Group: includes Alibaba’s streaming and cinema businesses.

The Chinese tech giant’s overhaul comes on the back of the company facing continued growth challenges in recent quarters – the company wiped around $600 billion from its October 2020 peak as she continued to struggle against the Chinese government’s crackdown on technology. companies.

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The stock moves reflect more of a sense of relief than investors’ hopes for the company, Guy Spier, value investor and disciple of Warren Buffett, told CNBC’s Tanvir Gill.

“The rally in stocks is not so much because the market expects higher profitability, as much as relief that tensions with the regulator appear to have been resolved,” Spier said, adding that the company will face less pressure in the future.

He added that Chinese consumers — not investors — would be the beneficiaries of Alibaba’s overhaul.

“It paves the way for a more innovative Chinese technology sector and a lot more competition – so very good for Chinese consumers,” he said, adding that it “reduces a company’s concentration and power in China – which made Chinese regulators uncomfortable.”

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