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Alibaba’s U.S.-listed shares rose 7% in pre-market trading.
Here are comments from analysts:
DAVID BLENNERHASSETT, ANALYST AT BALLINGAL INVESTMENT ADVISORS
“This somewhat mirrors Alphabet (NASDAQ:GOOGL)’s path in which it also became a Holdco for a number of operations. Sounds like a sound practice for the siloed ops to independently carve out their own brand/narrative, if you will, IPO, and uplift funds to the parent.
“Although this may provide added granularity to Alibaba’s various businesses, it doesn’t necessarily translate Alibaba is more attractive if it continues to control each segment – or holding minority/equity-accounting stakes, and the market assigns discounts on discounts.
“I do wonder if there is some regulatory angle here, ringfencing some outfits that may face greater scrutiny. Interesting timing as this announcement coincides with Ma visiting China again.”
STUART COLE, HEAD MACRO ECONOMIST AT EQUITI CAPITAL, LONDON
“I am not sure how quickly Alibaba could be broken up. I am sure they have done some work on this before announcing it, but it seems quite a large job to create six companies out of one. But it does inject an element of flexibility and adaptability into the company, which currently is something of a behemoth.
“And it will allow the more successful of the six new companies to potentially raise finance more easily and cheaply than the parent company can, as they will not be burdened by the slower, less profitable parts of the business. So for investors, they get the opportunity to put their funds in the parts they like whilst avoiding the parts they do not, unlike the current situation.
“It does seem something of a coincidence that this is happening just as Jack Ma seems comfortable returning. To me, it suggests something that Alibaba has been wanting to do for some time, but has been waiting for the opportunity to do so.”
KENNY NG, STRATEGIST AT CHINA EVERBRIGHT SECURITIES, HONG KONG
“It releases additional value. With this expectation, investors will be more positive on Alibaba. It may reflect a new round of development for the business and reduce worries of regulatory issues.”
