Las actions of Ali Baba Group Holding Ltd. in the United States rose up to 13% after China’s online commerce leader announce plans to split his $220 billion empire into six business unitsa major restructuring that would spawn several initial public offerings.
The move frees up the Chinese company’s main divisions, from e-commerce and media to cloud, to operate with much more autonomy, laying the groundwork for future spin-offs and market debuts.
The shift to a holding company structure is unusual for major Chinese technology companies and could set an example for Alibaba peers. Decentralizing the company’s business lines and decision-making power addresses one of Beijing’s main goals during its campaign of widespread crackdown on the technology sector.
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The government had criticized the influence of online platforms, particularly those of Alibaba and WeChat operator Tencent Holdings Ltd. That will likely mean that restructuring would attract support from government regulators who worried that the concentration of power in technology would stifle innovation. Alibaba and Tencent invested in hundreds of startups over the years, often helping to strategize as they grew.
“Es a step in the direction of China’s policy to reduce the monopolistic nature of tech giantssaid Marvin Chen, an analyst at Bloomberg Intelligence. “While Chinese tech spinoffs are not uncommon, the move appears to be broader, including core businesses that can serve as a blueprint for the industry’s future.”
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Alibaba’s announcement on Tuesday coincided with the return of billionaire co-founder Jack Ma a China after more than a year abroad.
It marks a departure from the internet company’s traditional preference of keeping most of its operations under one roof, operating everything from supermarkets to data centers under Alibaba’s main umbrella. It’s also a strong sign that Alibaba is ready to raise funds with investors and capital markets, having lost more than $500 billion in value under a crackdown by Xi Jinping’s government.
Group chief executive Daniel Zhang will head the cloud intelligence division, a nod to the growing role AI will play in the e-commerce leader’s long-term business. He will continue to lead the parent company.
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