KazPost

Kazakhstan News
Saturday, Jun 03, 2023

Alibaba's breakup lifts hopes China's regulatory winter is thawing

Alibaba's breakup lifts hopes China's regulatory winter is thawing

Alibaba Group's (9988.HK) plans for a major revamp have been taken as a signal that Beijing's regulatory crackdown on corporates is ending, propelling its shares higher and boosting investor confidence in prospects for Chinese tech firms.

The Jack Ma-founded conglomerate said on Tuesday it was planning to split into six units and explore fundraisings or listings for most of them, marking the biggest restructuring in its 24-year history.

Its Hong Kong-listed shares closed up 12%, tracking a rally in its U.S.-listed shares overnight , and giving the group a market value of about $255 billion. Those gains led the Hang Seng Index (.HSI) and other markets in the region higher.

Many investors have seen a wave of regulatory blitzes over the last couple of years that have hit its internet, private education and property sectors hard as a major cloud hanging over China's private sector.

"We think this is likely a sign that we are moving closer to the end of the regulatory scrutiny...and we would expect that the company moves back into the good graces of the regulators and policy makers after this," said Jon Withaar, head of Asia special situations at Pictet Asset Management.

Alibaba will discuss the plan at a conference call on Thursday.


Alibaba said it would split into six units - 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 group has been planning to spin off individual business units for a long time, according to two sources familiar with the company's thinking.

"There was a consensus within and outside Alibaba that the stock was trading at a major discount to the inherent value of the businesses," said one of the people, adding that the company had become "too bloated".

The person said there would be five initial public offerings from the units, while Taobao and Tmall, Alibaba's core revenue drivers, would remain with the current listed entity.


Hong Kong is the most likely venue for these IPOs, said the person, and a separate source familiar with Chinese tech companies' capital markets transactions.

The sources declined to be identified as the information was not public. Alibaba did not respond to a request for comment.

Alibaba would re-organise into a holding company structure. Daniel Zhang will retain his position as group CEO and will also lead the cloud-focused unit. The other divisions will have their own CEOs and boards.

It would not be the first time Alibaba has spun off its business units. In 2011, the company hived off its fast-growing payments arm Alipay, which later evolved into the fintech major Ant Group.


PAIN ENDING?


Bank of America analysts described Alibaba's restructuring as "an important experiment", which would test whether or not China's biggest companies could meet Beijing's demand to "contribute to society".

Morgan Stanley said the announcement would step up support for private sectors and platform companies.

"We believe such efforts will help stimulate efficiency and creativity by restoring/improving the business environment," analyst Laura Wang said in a research note.

She added that a recent statement from China's cyberspace regulator about protecting entrepreneurs from defamation also signalled a possible end to regulatory pressure on the sector.

Morgan Stanley values the entire group at as much as $530 billion or $200 a share, based on their valuation model of each business unit.

During the regulatory crackdown, Alibaba faced scrutiny for engaging in monopolistic behaviour in e-commerce, as well as for data security practices in its cloud business and labour practices at its delivery units.

In what many observers viewed as symbolic of the regulatory chill, Ma left China in late 2021 and was seen travelling to a number of different countries.

He was spotted on Monday in Hangzhou, home to Alibaba, just one day before the company announced the restructuring.

Brian Tycangco, who tracks China's tech sector at Stansberry Research, said that in addition to enabling higher valuations, the restructuring better protects individual divisions from future government regulation.

"Any new regulations will likely not affect the whole company now - just the particular division that that regulation covers," he said.

The split may pave the way for other Chinese tech giants to undergo similar restructuring, CMC Markets analyst Tina Teng said.

In addition to its core gaming and social media businesses, Tencent Holdings (0700.HK) also has cloud and fintech arms. JD.com (9618.HK), Alibaba's longtime e-commerce rival, has in recent years made a number of spin-offs, including its JD Logistics (2618.HK) and its cloud and AI-focused arm JD Digits.

Shares in Tencent and JD.com initially surged but later pared gains to end just under 2% higher. In Japan, SoftBank Group Corp (9984.T), which has a 13.7% stake in Alibaba, shot up 6.2%.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

KazPost
Close
0:00
0:00
Nvidia Joins Tech Giants as First Chipmaker to Reach $1 Trillion Valuation
Drone Attack on Moscow's Wealthiest Neighborhoods Suspected to be Launched by Ukraine
Elon Musk Meets Chinese Finance Minister in Beijing
AI ‘extinction’ should be same priority as nuclear war – experts
Prominent Hacker Forum RaidForums Suffers Substantial Data Breach
Nvidia CEO Huang says firms, individuals without AI expertise will be left behind
WPP Revolutionizes Advertising with NVIDIA's AI Powerhouse
Two US Employees Fired For Chasing Robbers Out Of Store As They Broke ''Company Policy''
Pfizer, the EU, and disappearing ink - Smoke, Mirrors, and the Billion-Dose Pfizer Vaccine Deal: EU's 'Open Secret
A provocative study suggests: Left-Wing Extremism and its Unsettling Connection to Psychopathy and Narcissism
Ukrainian Intelligence Official Admits to Assassination Attempts on Putin
Bernard Arnault Loses $11.2 Billion in One Day as Investors Fear Slowdown in US Growth Will Reduce Demand for Luxury Products
Russian’s Wagner Group leader: “I am not a chef, I am a butcher. Russia is in danger of a revolution like in 1917.”
TikTok Sues Montana Over Law Banning the App
Ron DeSantis Jumps Into 2024 Presidential Race, Setting Up Showdown With Trump
Talks between US House Republicans and President Biden's Democratic administration on raising the federal government's $31.4tn debt ceiling have paused
Biden Administration Eyeing High-Profile Visits to China: The Biden Administration is heating things up by looking into setting up a series of top-level visits to Beijing by top officials in the coming months
Debt Ceiling Crises Have Unleashed Political Chaos
Weibao Wang, a former software engineer at Apple, was charged with stealing trade secrets related to autonomous systems, including self-driving cars
Mobile phone giant Vodafone to cut 11,000 jobs globally over three years as new boss says its performance not good enough
Elon Musk compares George Soros to Magneto, the supervillain from the Marvel Comics series.
Warren Buffett Sells TSMC Shares Over Concerns About Taiwan's Stability
New Study Finds That Secondary Bacterial Pneumonia Is a Major Cause of Death in COVID-19 Patients Who Require Ventilator Assistance
King Charles III being crowned.
'Godfather Of AI' Geoffrey Hinton Quits Google To Warn Of The Tech's Dangers
A Real woman
Vermont Man Charged with Stalking After Secretly Tracking Woman with Apple AirTag
Elon Musk Statements About Tesla Autopilot Could Be 'Deepfakes,' Lawyers Claim. Judge Evette Pennypacker Does Not Understand How Far and Advanced This Technology Became
Ukraine More Prepared for Counterattack as Reinforcements Arrive
UK Prime Minister Rishi Sunak and Italian Prime Minister Giorgia Meloni Discuss Migration, Defence, and Ukraine
AT&T's Successful Test of Satellite-Based Phone Call Raises Possibility of Widespread Coverage
CNN: "Joe Biden is asking for four more years — when 74% of Americans think the country is heading the wrong way“
Turkish President Recep Tayyip Erdogan Cuts Short Live TV Interview Due to Health Issue
Pulitzer Prize-winning journalist Seymour Hersh slams New York Times' pro-government stance and treatment of sources
Enough is enough: it's time to end the war in Ukraine. While Russia may be to blame for starting it, Russia is not the one refusing to stop it
Fox News Settles their case with Dominion Voting Systems for a staggering $787.5 MILLION
21-year-old Massachusetts Air National Guard member Jack Teixeira has been arrested for leaking classified Pentagon Documents
The Supreme Court will allow a 12-year-old transgender West Virginia girl to compete on her middle school’s girls' sports teams amid a lawsuit over a ban
Bank of America cuts short conference after outrage at Ukraine comments
Mitt Romney calls Trump indictment 'overreach,' says charges were 'stretched' to suit a 'political agenda'
The G-7 aims to make global crypto regulations tougher
Russia arrested an American reporter for the Wall Street Journal on espionage charges
Don’t Dismiss China’s Peacemaking Bid
China and Brazil have signed a new deal that will allow them to trade in their own currencies, bypassing the US dollar as an intermediary
Elon Musk and Others Call for Pause on A.I., Citing ‘Profound Risks to Society’
“We've had evidence prior to the pandemic that masks were largely ineffective at preventing community transmission of influenza “
Former Starbucks CEO Howard Schultz:
Former Starbucks CEO Howard Schultz rejects being labeled a "billionaire"
Jamie Dimon is being deposed over JPMorgan Chase role in Epstein lawsuits
Brand new security footage has just been released to the public showing the Active shooter Audrey Elizabeth Hale drove to Covenant Church School in her Honda Fit this morning, parked, and shot her way into the building
×