Alibaba to split into 6 units as Jack Ma returns home

Just a day after Jack Ma returned to China, Alibaba Group made the major announcement that it will be splitting into six units. Is it a coincidence? Experts believe that Ma’s return is a result of the Chinese government easing up its regulation of the private sector and the Alibaba restructuring is something that the company had wanted to do but was waiting for the right moment.

Alibaba Group lost about 70% of its value in the US stock exchange market after the Chinese government began its crackdown on the private sector in 2020. Reprieve now seems to be near as the shares rose by 14%.

The six new units to be formed in the new split are Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group and Digital Media and Entertainment Group.

"The original intention and fundamental purpose of this reform is to make our organisation more agile, shorten decision-making links and respond faster," Chief Executive Daniel Zhang said in a letter to staff.

Each unit will have its own CEO and board of directors except for Taobao Tmall Commerce Group which will remain a wholly owned unit of Alibaba Group. Daniel Zhang will head the Cloud Intelligence Group while also retaining his position as CEO of Alibaba Group which will serve as a holding company.

The units are set to start fundraising and also explore listing options. Experts also believe the split could be the company’s response to increased scrutiny of Chinese firms by the international government that has seen TikTok get banned in a number of countries.

"By paving the way for Alibaba's various new units to list, the Chinese government may be signalling less hostility towards its tech giants as a placatory message to U.S. and international investors," said Hariharan, managing director of global macro research.