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 Ele.me 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.
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.”
“Used by others”
Tech stocks in Hong Kong soared in morning trading: shares of Tencent increased by 3%, JD.com gained nearly 5% and Baidu increased by more than 3%. The Hang Seng Tech index climbed 3.3% in its first hour of trading, driving gains in the Asia-Pacific region.
The movements seen in the stock prices of Alibaba’s peers on Wall Street indicated that other Chinese tech companies may look to similar measures for their businesses.
“I think investors are saying what we’ve seen at Alibaba, really the Chinese tech leader, that their plans could be used by others,” KraneShares CIO Brendan Ahern said, pointing to the ADR moves seen in Tencent, JD.com, and Baidu.
He noted that the company’s announcement showed Alibaba founder Jack Ma, who had recently been spotted in China after spending months abroad, was involved in the process.
“It’s very clear he’s had a role in this new structure which is really around what the company said in the press release, it’s about unlocking shareholder value,” Ahern said.
– CNBC’s Arjun Kharpal contributed to this report.
Correction: This story has been updated to reflect that Alibaba shares in Hong Kong surged on Wednesday.