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The US shares of Alibaba Group Holding Ltd, the Chinese multinational conglomerate specialising in e-commerce, retail, internet, and technology, have skyrocketed by 13%, <a href="https://www.bloomberg.com/news/articles/2023-03-28/alibaba-splits-into-six-units-that-may-pursue-individual-ipos#xj4y7vzkg" target="_blank" rel="noopener">according to Bloomberg</a>, after it announced it would be splitting the $220bn empire into six separate business units. 



These business units will explore independent fundraising, market debuts, and/or listings. <a href="https://finance.yahoo.com/news/alibaba-splits-six-plans-ipos-103353485.html" target="_blank" rel="noopener">According to Yahoo Finance,</a> the US-traded shares surged as high as $96.98 as the market opened in New York on Tuesday. 



It has been a difficult year for the company, during which co-founder and former chairman Jack Ma resigned. The news follows the public return of Jack Ma, who vanished after a run-in with authorities two years ago. 



<figure class="wp-block-image size-full"><img width="1920" height="1080" src="https://technext24.com/wp-content/uploads/2023/03/image-190.png" alt="Alibaba to split into six separate businesses as Jack Ma returns home" class="wp-image-186949"/><figcaption>Jack Ma</figcaption></figure>



The decision to break up the company may be an effort to simplify its structure and make it more manageable and appease regulators who have been cracking down on China&#8217;s tech giants. It is a major restructuring that promises to yield several initial public offerings. 



It is also the company&#8217;s biggest restructuring in its 24-year history. The move, however, could serve as a model for Alibaba&#8217;s competitors. The six units are said to include Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group, and Digital Media and Entertainment Group. 



Each business will have its CEO and a board of directors. Its main goal will be to tackle the rapid changes in its market. By separating these businesses, Alibaba will have more flexibility to pursue new growth opportunities, attract more investors and reduce worries about regulatory issues. 



Read Also: <a href="https://technext24.com/2023/02/07/alibabas-daraz-fires-11-staff/">Alibaba-backed Daraz fires 11% of its global workforce</a>



<h4 id="alibabas-split-and-the-global-economic-downturn">Alibaba&#8217;s split and the global economic downturn </h4>



<figure class="wp-block-image size-full"><img width="960" height="540" src="https://technext24.com/wp-content/uploads/2023/03/image-189.png" alt="Alibaba to split into six separate businesses as Jack Ma returns home" class="wp-image-186946"/><figcaption>Photo Credit: Bloomberg</figcaption></figure>



The tech industry is undergoing a major phase. Recently, many tech companies have publicly declared that they have been victims of macroeconomic situations and global economic downturns. For quite a number of them, they had to engage in cost-cutting strategies, including reducing their workers&#8217; headcounts.



In China, the tech industry is also undergoing a major shift, and companies like Alibaba must adapt to stay competitive. <a href="https://www.cnbc.com/2023/03/28/alibaba-says-it-will-split-into-6-units-that-can-raise-funds-and-ipo.html" target="_blank" rel="noopener">According to CBNC,</a> in 2020, around $600 billion of value has been wiped out since Alibaba’s share price peak. I<a href="https://hr.economictimes.indiatimes.com/news/workplace-4-0/talent-management/alibaba-laid-off-19000-employees-in-2022-to-improve-cost-efficiency/98270125#:~:text=2%20min%20read-,Alibaba%20laid%20off%2019%2C000%20employees%20in%202022%20to%20improve%20cost,in%20its%20earnings%20report%20Thursday." target="_blank" rel="noopener">n February 2023,</a> Alibaba Group Holding Ltd. reduced its workforce by about 19,000. Like every other big tech company, it felt the heat of the economic downturn.



<figure class="wp-block-image size-full"><img width="780" height="520" src="https://technext24.com/wp-content/uploads/2023/03/image-191.png" alt="Alibaba to split into six separate businesses as Jack Ma returns home" class="wp-image-186951"/></figure>



But that is not all. China’s stringent Covid Zero policy, with lockdowns, affected the business&#8217;s overall performance as it blunted consumer spending. Also, unfavourable regulatory policies have severely affected; companies such as Alibaba and its rival, Tencent Holdings Ltd. The two companies have felt the effects of these regulations causing a dry-up, with both companies seeing their stock prices fall in recent months.



Although the Chinese government has stepped up its efforts to regulate the industry with new rules aimed at curbing monopolistic practices and protecting user data, <a href="https://www.reuters.com/markets/deals/alibaba-splits-into-six-units-that-may-pursue-individual-ipos-bloomberg-news-2023-03-28/" target="_blank" rel="noopener">Reuters reported</a> that some companies have been hesitant, privately pointing to a lack of new supportive policies in the new regulatory framework.



With the return of Jack Ma, there might be a boost in investors&#8217; faith and increased confidence among entrepreneurs. It is not clear how this splitting will pay off, but it indicates that Alibaba is taking steps to navigate the changing landscape and position itself for long-term success.



Read Also: <a href="https://technext24.com/2021/05/14/alibaba-makes-record-28-6bn-revenue-in-q4-but-still-posted-first-loss-in-7-years-due-to-china-fine/">Alibaba makes record $28.6Bn revenue in Q4 but still posted first loss in 7 years due to China fine</a>

Alibaba to split into 6 separate businesses as Jack Ma returns

Technext.ng

Alte articole publicate pe 28 mar. 2023

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