BABA stock soared Tuesday as Alibaba announced a groundbreaking move to split itself into six different companies that will operate independently and are free to raise funds and explore initial public offerings.
The China-based e-commerce titan said the six different groups will cover local services such as food delivery, along with its Cainiao logistics group as well as digital media and entertainment. They'll also cover digital marketplaces, e-commerce and the cloud.
"At 24 years of age, Alibaba is welcoming a new opportunity for growth," Alibaba Chief Executive Daniel Zhang said in a written statement with the announcement, "The market is the best litmus test, and each business group can pursue independent fundraising and IPOs when they are ready."
Zhang will continue to serve as chairman and chief executive of Alibaba Group, the parent company, while each of the six business groups will be managed by their own CEO and board of directors, Alibaba said in its news release. Zhang will also head up the cloud intelligence division. Its domestic e-commerce business will remain a wholly owned unit of Alibaba, the company said.
Alibaba seeks to free the company's main divisions from e-commerce and media to the cloud to operate with far more autonomy, laying the foundation for future spinoffs and market debuts.
BABA Stock Soars On The News
Further, Alibaba said the move is "designed to unlock shareholder value and foster market competitiveness."
BABA stock surged 14.3%, closing at 98.40 on the stock market today.
The reorganization comes at a time when Beijing is easing up on what has been a tough regulatory environment. The crackdown has affected China internet companies, holding back Alibaba and others.
The government had criticized the influence of the largest online platforms, particularly Alibaba and Tencent. The Alibaba restructuring will likely mean it would draw support from government regulators concerned that concentrated power in tech suppressed innovation. Alibaba and Tencent invested in hundreds of startups over the years, often helping to craft strategy as they grew.
Alibaba's primary competitors are JD.com, Tencent Holdings and PDD Holdings. Tencent stock jumped 8% to 49. JD climbed 4.5% to 41.55. PDD rose 1.6% to 72.84.
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