China’s Alibaba Group said on Tuesday that it would become a holding company with six different business groups, in a major reshuffle that signaled the potential breakup of the country’s biggest e-commerce firm.
Alibaba described the restructuring as the “most significant” organizational overhaul in its 24-year history. It said each unit would have its own chief executive and board of directors to allow for quicker decision-making.
The units will be allowed to seek outside capital with an eye toward eventual initial public offerings. Only its China e-commerce unit, Taobao Tmall Commerce Group, will remain a wholly owned Alibaba entity.
In early trading, Alibaba’s U.S.-listed shares rose 8 percent.
The experience of Alibaba, an internet conglomerate with a variety of businesses that include online shopping and cloud computing, has become a cautionary tale for the cost of challenging China’s ruling Communist Party and the extent of Beijing’s campaign to curb the power of its technology giants.
Alibaba’s decision to potentially break up the company into several smaller entities may also ease the government’s concerns about the concentration of power and influence among the country’s sprawling web giants.
But the restructuring comes at a time when the government appears to be relaxing its regulatory stronghold on the technology sector after a tumultuous three years — a period marked by the disappearance of Alibaba’s billionaire founder, Jack Ma, from the public eye. He was driven underground after criticizing Chinese regulators in 2020 for stifling innovation at Ant Group, Alibaba’s financial technology sister company.
Once a gregarious and outspoken figure, a symbol of China’s ability to compete globally, Mr. Ma has maintained a low profile in recent years, choosing to spend most of his time abroad. The whereabouts of Mr. Ma, China’s most famous businessman, had become a source of intrigue.
Earlier this week, he resurfaced in mainland China for the first time after a prolonged absence. It is not clear how the timing of Mr. Ma’s return affected Alibaba’s announcement. He retired from the company in 2019, but he remains one of its largest individual shareholders.
After Mr. Ma’s remarks in 2020, Chinese officials suspended Ant Group’s plans for an initial public offering. Chinese regulators forced Ant to register as a financial holding company and to separate its payment app from its financial services. The public listing never took place. Subsequently, regulators fined Alibaba $2.8 billion for abusing its dominance.
In January, Ant Group said Mr. Ma had planned to relinquish control of the company. Around the same time, the top Communist Party official at China’s central bank said the so-called rectification campaign into the biggest technology companies was “basically complete.”
Mr. Ma’s disappearance illustrated how business interests had taken a back seat to the priorities of the state under Xi Jinping, China’s top leader, and how even its most powerful companies were not immune from scrutiny. But as China’s economy struggles to regain momentum after relaxing its restrictive zero Covid policies, Beijing is trying to convince business leaders that it is focused on jump-starting the economy.
By allowing different businesses to spin off and possibly go public, Alibaba said the move was “designed to unlock shareholder value.” The company’s stock is down roughly 70 percent since it became a target in the technology sector crackdown.
In a letter to employees, Daniel Zhang, Alibaba’s chief executive, said the holding company structure made sense for Alibaba because the nature of the six business groups are different with various stages of development and disparate needs. Alibaba did not explain why Taobao Tmall, the China commerce business that accounts for the vast majority of its revenue, will remain wholly owned.
“If you do not embrace change, you will become rigid, and if you do not change yourself, you will be defeated by the times,” Mr. Zhang wrote.
In addition to being the head of the holding company, Mr. Zhang said he will also serve as chief executive of the Cloud Intelligence Group, the company’s cloud computing and artificial intelligence division.
The other business groups are Global Digital Commerce Group, its overseas e-commerce businesses; Local Services Group for its mapping and delivery services; Cainiao Smart Logistics, its logistics and supply chain management arm; and Digital Media and Entertainment Group.
The move and the stated rationale behind it is similar to Google’s decision in 2015 to create a holding company under the Alphabet umbrella to allow its various business ventures to operate more independently.
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