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

Signage at Alibaba Group Holding Ltd offices. in Beijing, China on Tuesday January 17, 2023.

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Shares listed in Hong Kong Alibaba Soared 15% at Wednesday’s opening after the company announced a major overhaul to split the tech giant into six business groups.

On Wall Street, Alibaba shares surged overnight to close 14.26% higher. They were up 0.71% in after-hours trading.

The decision to split into different entities means each is managed by its own leadership and board and can conduct independent fundraising and IPOs when they are ready.

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

The six corporate groups are:

  • Cloud Intelligence Group: includes the company’s cloud and artificial intelligence activities;
  • Taobao Tmall Trading Group: online shopping platforms such as Taobao and Tmall;
  • Local Service Group: covers Alibaba’s grocery delivery service as well as its mapping;
  • Cainiao Intelligent 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: comprises Alibaba’s streaming and film business.

The Chinese tech giant’s restructuring comes as the company has faced ongoing struggles to grow in recent quarters – the company has shed around $600 billion from its October 2020 peak as it continues to grapple with the Chinese crackdown Government-vs-technology companies grappled.

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The stock moves reflect a sense of relief rather than investor hopes for the business, value investor and Warren Buffett alumnus Guy Spier told CNBC’s Tanvir Gill.

“The stock rally is less because the market expects higher profitability and more because of 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 sets the stage for a more innovative Chinese tech sector and far more competition — so very good for Chinese consumers,” he said, adding that it “reduces the concentration and power of a company in China — which made Chinese regulators uneasy.” “

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