Alibaba Group Holding Ltd.’s US shares surged 12% after China’s online commerce leader announced plans to split its $220 billion empire into six business units, a significant restructuring that promises to yield several initial public offerings.
The move frees up the Chinese company’s main divisions from e-commerce and media to the cloud to operate more autonomously, laying the foundation for future spinoffs and market debuts.
The shift to a holding company structure is rare for major Chinese tech firms and could present a template for Alibaba’s peers. Decentralizing the company’s business lines and decision-making power addresses one of Beijing’s primary goals during its sweeping technological sector crackdown.
The US-traded shares jumped as high as $96.98 as the market opened in New York on Tuesday.
The government had criticized the influence of online platforms, particularly those of Alibaba and WeChat operator Tencent Holdings Ltd. That will likely mean the restructuring would draw support from government regulators concerned that technology’s concentrated power suppressed innovation. Alibaba and Tencent invested in hundreds of startups over the years, often helping to craft strategy as they grew.
“It is one step in the direction of China’s policy to reduce the monopolistic nature of the tech giants,” said Marvin Chen, an analyst with Bloomberg Intelligence. “While China tech spinoffs are not uncommon, the move looks more encompassing, including core businesses, that may serve as a blueprint for the industry going forward.”
