BABA shares soared on Tuesday after Alibaba (BABA), announced an innovative move to separate itself into six companies. Each company will be independent and free to raise money and consider initial public offerings.
The China-based ecommerce giant said that the six groups would cover local services, such as food deliveries, as well as its Cainiao logistic group and digital media and entertainment. The groups will also cover digital markets, ecommerce and cloud.
Alibaba CEO Daniel Zhang stated in a statement that the company is celebrating its 24th birthday. "The market will be the best test and each group of business can raise funds independently and launch an IPO when it is ready."
Alibaba announced in a news release that Zhang will continue as Chairman and Chief Executive Officer of Alibaba Group. Each of the six business divisions will be run by its own CEO and Board of Directors. Zhang will also lead the cloud intelligence division. The company announced that its domestic ecommerce business would remain an Alibaba-owned unit.
Alibaba wants to give its main divisions, from ecommerce to media to cloud computing, more autonomy to run their businesses. This will lay the groundwork for future market debuts and spin-offs.
BABA Stock Soars on the News
Alibaba also said that the move was "designed to unlock shareholder values and foster market competition."
BABA's stock surged by 14.3% today, closing at 98.40.
Beijing has recently relaxed its strict regulatory environment. This crackdown has affected China's internet companies and held back Alibaba, among others.
The government has criticized the influence and power of the biggest online platforms, namely Alibaba and Tencent. Alibaba's restructuring is likely to attract the support of government regulators who are concerned that a concentrated power in technology suppresses innovation. Alibaba and Tencent have invested in hundreds startups over the past few years, helping them to develop their strategy.
Alibaba's main competitors are JD.com, Tencent Holdings and PDD Holdings. Tencent's stock rose 8% to 49. JD rose 4.5% to reach 41.55. PDD grew 1.6% to 72.84.