Alibaba to Split into Six Divisions

Alibaba announced yesterday that it intends to split into six independent units, which propelled its share price higher by 14%. The gains were most welcome, because the shares have been sliding lower ever since 2020 when founder Jack Ma gave a speech very critical of the Chinese government. That set off a brutal round of fines and regulatory actions against the tech sector by Beijing officials. Ma resigned and went into hiding.

The Alibaba split-up should unlock value for shareholders, but more importantly, signals that they are back in the good books with the authorities. A move of this scale was most likely green-lit by regulators. Strategic decision-making will move from the Alibaba head office down to each division, complying with President Xi's call for a less dominant tech sector.

Interestingly, this announcement coincides with Jack Ma's return to mainland China, when he visited a school. The positive sentiment carried over to Tencent, which closed up 4% yesterday and another 1% today. These moves are good to see, but there is still a lot of work to do to reclaim all the value lost since the beginning of Beijing's disappointing tech crackdown.