Alibaba Shares Pop: Company To Restructure Into 6 Independent Entities To Unlock Value, Eye Fresh IPOs

Alibaba Group Holding Limited BABA shares are soaring in the premarket session as the company looks to restructure to unlock value.

Since its establishment over two decades ago, Alibaba has proposed revamping its operations in its most significant corporate restructuring.

Alibaba will reorganize its businesses into six independently run entities: Cloud Intelligence Group, e-commerce under Taobao-Tmall, Cainiao’s smart logistics operations, Local Services group, Global Digital Business Group, and the Digital Media and Entertainment Group, SCMP reports.

The restructuring aims to streamline management and shorten decision-making, taking a page out of the playbook of Alphabet Inc GOOG GOOGL.

Also Read: Alibaba’s AliExpress Prioritizes Spain For Overseas Growth, Also Eyes South Korea

Alibaba CEO Daniel Zhang will delegate operational decisions, including hiring and firing, research, profit, and losses, to the CEOs of each business unit.

Each of the business units will have to face the tests of market forces themselves, including the possibility of seeking their initial public offerings (IPOs), Zhang said. 

“With this change, middle and back office functions at [Alibaba] will be slimmed down, while only functions required for listed company compliance will be retained.”

Zhang will head the new Cloud Intelligence unit, in charge of cloud computing and big data. Trudy Dai will head the Taobao-Tmall division as CEO, while Yu Yongfu will head the Local Services Group.

Cainiao’s current CEO, Wan Lin, will continue to head the smart logistics group, Jiang Fan will lead the Global Digital business group, and Fan Luyuan will lead the Digital Media group.

Nearly 70% of Alibaba’s 170 billion yuan ($24.7 billion) in third-quarter revenue came from the largest e-commerce platforms, Taobao and Tmall Marketplace. But the cloud computing business is Alibaba’s fastest-growing unit with the most significant potential.

Price Action: BABA shares traded higher by 7.35% at $92.45 premarket on the last check Tuesday.