Ali Baba’s Six Sons: A Political or Financial Chop?

Last week, optimism prevailed in the markets, not only with the apparent calm in the banking sector (after a crisis Silicon Valley Bank and Credit Suisse), but also because of the plan launched by the Chinese conglomerate Ali Baba Divided into six sections, each with separate panels and possibly in the future separate menus.

The repercussions of this process go beyond what may result from the evaluation of Alibaba, which after the delivery of its project It rose more than 15% on the New York Stock Exchange. In addition, according to analysts, it means a possible strengthening of corporate activity in China, and most importantly, it may indicate truce From the battle that the Beijing authorities continue to reduce the power of domestic technology giants.

“The reorganization of Alibaba is very important, not only because it is an organization with enormous influence in the world’s second largest economy, but also because we expect it to represent The end of the organizational offensive China against various sectors, including technology,” says Nigel Green, CEO of financial advisory firm DeVere Group.

Communist government pressure began in 2020, when it forced Alibaba to suspend the public sale offering (IPO) of its payments subsidiary. antifinancial, In retaliation for a speech in which the founder of the group said, Jack Ma, he had criticized the authorities. At that time, Beijing seemed to have discovered that the growth of technology companies (not only Alibaba, but also Tencent or JD) could turn them into a force opposite to the closed domination it now exercises Xi Jinping.

Jack Ma himself left the country and the list of Alibaba, which came to touch $300 in 2020now weak to under $100.

But the division, which seems to have the blessing of the executive branch, could provide a solution to the conflict since then Facilitating state control over various divisions, especially the most sensitive in terms of data transmission such as those running cloud services or an e-commerce platform. Evidence of the détente is that the same thing appeared again this week at a public event in China.

faster

Daniel Chang, the current head of Alibaba, justified the split to analysts on purely business grounds. In his opinion, the new structure is necessary so that there will be faster decision-making in each different business to adapt to changes in the market, and at the same time Alibaba will be able to maintain synergy by working like holding various units With some common services.

Alicia Yap, analyst at Citynotes that “It wasn’t surprising for Alibaba to break up some companies, but the reorganization into six divisions to unlock its value is surprising.”

Ronald Keung Goldman SachsIt is estimated that the sum of the value of different companies will lead to capitalization 373.5 billion dollars for the group, which equates to $142 a share (now about $102).

The most valuable stop is China’s e-commerce, with brands like Taobao, Tmall, Taokekal and 1688. Trudy Day He will be the CEO of this subsidiary.

Another pillar is cloud services and developments in artificial intelligence, with Daniel Chang as administrator.

The international trade part, which includes AliExpress, Trendyiol, and Daraz He will be the CEO jiangfan.

Domestic services in China (such as food delivery) act as their manager Yeoyeongfu.

Logistics area under the leadership of Wan LinDigital media and entertainment Luyuan Fan.

One of the goals of the plan is to reach each unit Self funding and go publicAt that time, Alibaba Group may decide whether to continue as the majority shareholder or stop merging the corresponding subsidiary.

Although analysts set Alibaba’s price targets much higher than the price, Goldman Sachs points out jd.com It still trades at a discount to the sum of its parts, though its subsidiaries JD Health, JD Logistics, and Dada Nexus are listed on the stock market.

model for the West

These restructurings have a clear Chinese reading, but the model of separation between the tech giants has also been broadcast at times to US companies such as Meta, Alphabet and Amazon. Their multiple growths and claws may one day lead to this type of pruning.