Alibaba plans to split into six companies to position itself for a Chinese tech comeback
Jack’s back… but Baba’s breakin’ up. A day after cofounder Jack Ma was finally spotted in China again, Alibaba (aka the Amazon of China) said it was splitting its biz into six independent companies. Refresher: Alibaba.com connects 1B+ buyers/sellers, but Alibaba the company is much more than e-comm — offering services like cloud computing, logistics, and entertainment. Now Baba’s gearing up for a breakup:
New focus: Each Alibaba-held company will have its own C-suite and be able to IPO independently. Units include cloud, e-comm, logistics, and media.
Less trouble? Alibaba shares jumped 14% yesterday on hopes that the breakup would ease China's regulatory concerns over its power. Smaller companies = less of a threat.
Beijing’s “tech rectification”… means tech’s gotten #rekt. Over the past two years China has cracked down on dozens of tech companies, levying big fines and imposing strict anti-monopoly laws to reel in their influence. In 2021, Baba was fined a record $2.6B after the gov’t said it failed to comply with anti-monopoly laws. Fintech giant Ant Group (1.3B+ users) was forced to halt its $35B mega-IPO. The country’s crackdown plunged the value of Chinese tech stocks and contributed to its slowest GDP growth in decades.
- The regulatory tide may be turning: DiDi (the Uber of China) got the gov’t green light to relaunch its biz after an 18-month ban.
Getting smaller can make you stronger… By breaking into smaller businesses, Baba could avoid being seen as too dominant, which could mean less scrutiny (and fewer penalties) from Chinese regulators. Keeping biz units separate could also help execs focus on industry-specific growth, rather than juggling several balls at once. If Baba’s split goes well, others could follow.