Alibaba to Split into Six Different Entities

Photo credit: UNCTAD/Flickr

Sign up for smart news, insights, and analysis on the biggest financial stories of the day.

One of China’s biggest tech companies is embracing a “let a hundred flowers bloom” approach to corporate expansion.

On Tuesday, e-commerce giant Alibaba announced its intention to split its massive privately-owned empire into six discrete entities, with each potentially seeking separate public listings. It’s a stark reversal from a yearslong effort to create an all-in-one megacorporation

Return of the Ma

This is a season of renewal for Alibaba. The company’s reclusive and often regime-critical billionaire co-founder Jack Ma returned to his home country this month for the first time in roughly a year. And after Beijing’s multiyear crackdown on tech giants, which included a $2.8 billion fine on Alibaba for alleged anti-competitive practices, many expect tensions to ease. That gives Alibaba an opportunity to shift gears and reorganize.

With increased competition in the e-commerce space (thanks to rivals JD.com, Pinduoduo, and the rise of live-shopping on ByteDance’s China-based TikTok equivalent, Douyin) and a squeeze on its cloud computing business during an economic slowdown, a restructuring may be just what Alibaba’s various divisions need to stay a step ahead of both competitors and regulators:

  • The conglomerate will be divided into six groups: Chinese e-commerce, global e-commerce, cloud computing, media and entertainment, digital mapping and food delivery, and logistics. Each will have its own CEO, the ability to raise external capital, and the freedom to seek an IPO.
  • Alibaba Group, meanwhile, will become a holding company overseen by chairman and CEO Daniel Zhang. Think Google’s evolution into Alphabet — only if IPOing YouTube or cloud services became a priority.

“This transformation will empower all our businesses to become more agile, enhance decision-making and enable faster responses to market changes,” Zhang said in a letter to employees seen by The Wall Street Journal.

Afterstocks: Alibaba’s listings in Hong Kong and New York will go unchanged, sources told WSJ — and traders so far are loving the news. Shares on the NYSE closed up some 14% on Tuesday. Maybe breaking up isn’t so hard to do after all.