Alibaba shares rise 15% in Hong Kong on news of major overhaul

  • Hong Kong-listed shares in Alibaba climbed at the open on Wednesday after the company announced a major overhaul to split the company into six business groups.
  • The company said in its announcement that the move is aimed at “unlocking shareholder value.”

Signage at the Alibaba Group Holding Ltd. offices in Beijing, China, Tuesday, Jan. 17, 2023.

Bloomberg | Bloomberg | Getty Images

Hong Kong-listed shares in Alibaba rose 15% at the open on Wednesday after the company announced a major overhaul to split the tech giant into six business groups.

On Wall Street overnight, Alibaba shares rose to close 14.26% higher. They were 0.71% higher in after-trade.

The decision to split into different entities means that each will be managed by its own leadership and board, and can pursue independent fundraising and IPOs when they are ready.

The company said the move aims to “unlock shareholder value.”

The six business groups are:

  • Cloud Intelligence Group: includes the Company’s cloud and artificial intelligence activities;
  • Taobao Tmall Commerce Group: online shopping platforms including Taobao and Tmall;
  • Local services group: covers Alibaba’s food delivery service as well as its mapping;
  • Cainiao Smart Logistics: houses Alibaba’s logistics service;
  • Global Digital Commerce Group: includes Alibaba’s international e-commerce businesses including AliExpress and Lazada;
  • Digital Media and Entertainment Group: includes Alibaba’s streaming and movie business.

The overhaul of the Chinese tech giant comes on the back of the company facing continued struggles with growth in recent quarters — the company erased roughly $600 billion from its peak seen in October 2020 as it continued to struggle with the Chinese government’s crackdown on technology. companies.

The stock moves are more reflective of a sense of relief, rather than investors’ hope in the business, value investor and Warren Buffett disciple Guy Spier told CNBC’s Tanvir Gill.

“The rally in the shares is not so much because the market expects greater profitability, rather than relief that tensions with the regulator appear to have been resolved,” Spier said, adding that the company will face less pressure going forward.

He added that Chinese consumers – not investors – would benefit from Alibaba’s overhaul.

“This lays the foundation for a more innovative Chinese technology sector and far more competition – so very good for Chinese consumers,” he said, adding that it “reduces the concentration and power of one business in China – which made Chinese regulators uncomfortable.”

Tech stocks in Hong Kong rose in morning trade: Tencent’s shares rose 3%, rose nearly 5%, and Baidu rose more than 3%. The Hang Seng Tech index rose 3.3% in the first hour of trading, leading gains in the Asia-Pacific region.

The moves seen in the share prices of Alibaba’s Wall Street peers indicated that other Chinese technology companies could turn to similar measures for their operations.

“I think investors are saying what we saw in Alibaba, really the leader in technology in China, that their plans can be used by others,” said Brendan Ahern, CIO of KraneShares, pointing to the ADR moves seen in Tencent, JD. com, and Baidu.

He noted that the company’s announcement showed that Alibaba founder Jack Ma, who was recently spotted in China after spending months abroad, was involved in the process.

“It’s very clear that he played a role in this new structure which is really around what the company said in the press release, it’s about unlocking shareholder value,” Ahern said.

— CNBC’s Arjun Kharpal contributed to this report.

Correction: This story has been updated to reflect that Alibaba shares in Hong Kong rose on Wednesday.

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