Alibaba shares jump 14% as plan to break up China tech giant is revealed

File photo: Jack Ma, CEO of Chinese e-commerce giant Alibaba, gestures as he speaks during his visit at the Vivatech startups and innovation fair, in Paris on 16 May 2019 (AFP via Getty Images)
File photo: Jack Ma, CEO of Chinese e-commerce giant Alibaba, gestures as he speaks during his visit at the Vivatech startups and innovation fair, in Paris on 16 May 2019 (AFP via Getty Images)

Chinese technology giant Alibaba’s shares jumped after the company announced a plan to break up into six business groups on Tuesday.

Alibaba said it will split the company into six business groups in a significant reorganisation in the Chinese e-commerce giant’s history.

Five of the six units that will be carved out of the company will explore raising fresh funding and initial public offering (IPO) options.

Alibaba’s shares gained more than 14 per cent in New York and were more than 13 per cent higher in Hong Kong on Wednesday, reported the BBC.

The e-commerce giant announced plans on Tuesday to split the company and said each business group will be managed by its own CEO and board of directors.

Alibaba said in a statement that the move is “designed to unlock shareholder value and foster market competitiveness”.

Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics, Global Digital Commerce Group and Digital Media and Entertainment Group will be the six entities that will be carved out.

The units will raise capital and seek stock market listings, except for the online retail platform Taobao Tmall Commerce Group, which will remain wholly owned by Alibaba, the media reported.

Alibaba said that the units will “capture opportunities in their respective markets and industries, thereby unlocking the value of Alibaba Group’s respective businesses”.

“The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready,” Alibaba CEO Daniel Zhang said in an email to staff.

“This transformation will empower all our businesses to become more agile, enhance decision making and enable faster responses to market changes,” Mr Zhang said in a statement.

This move comes after it was reported that Alibaba founder Jack Ma had returned to China after more than a year of living overseas.

The top Chinese entrepreneur visited a school he founded in the city of Hangzhou on Monday, sources aware of the businessman’s schedule had said.