Alibaba: Shares of Chinese tech giant rise after announced breakup

Shares of Chinese tech giant Alibaba have skyrocketed after it announced a plan to break up the company.

The company says five of the six units created by the move will explore new funding and IPO (initial public offering) options.

Alibaba shares gained more than 14% in New York on Tuesday and were up more than 13% in Hong Kong on Wednesday.

US-listed stocks are down nearly 70% since 2020 on concerns over Beijing’s crackdown on the technology sector.

The move comes after reports that Alibaba founder Jack Ma, who has rarely been seen in public for the past three years, resurfaced in China this week after a long absence.

The units will have their own chief executives and boards of directors. They are allowed to raise capital and seek a stock exchange listing, with the exception of online retail platform Taobao Tmall Commerce Group, which remains wholly owned by Alibaba.

“The market is the best litmus test, and any business group and company can pursue independent fundraising and IPOs when they are ready,” CEO Daniel Zhang said in a letter to staff.

Chinese technology analyst Rui Ma told the BBC that investors saw value in the restructuring because Alibaba’s business units can grow at their own pace.

She added that each unit will also be more streamlined and “less likely to be subject to antitrust violations.”

Alibaba’s restructuring comes after years of strict regulation for Chinese technology companies, said Scott Kessler, global technology, media and telecommunications sector leader at investment research firm Third Bridge.

“In recent months, the government has been less strict with big tech companies. People are wondering if this could be the start of a period where the government is shifting from being almost an adversary to companies to actually supporting companies,” he added. .

He met with staff and visited the classrooms of Yungu School in Hangzhou, the city where Alibaba’s headquarters are located, the newspaper said.

Mr. Ma was the most high-profile Chinese billionaire to disappear amid a crackdown on technology entrepreneurs.

The 58-year-old has kept a low profile since he criticized China’s financial regulators in 2020. In September 2019, he stepped down as chairman of Alibaba.