Alibaba Group Holding Ltd. has substituted eight-year veteran chief Daniel Zhang as chairman of the board at the Chinese e-commerce giant while Eddie Wu, now chairman of Alibaba’s core Taobao and Tmall online commerce divisions, will become chief executive officer (CEO). The moves follow deteriorating market share and Alibaba’s wrestling to return to sustainable growth in the post-pandemic era. The announcement signaling a shakeup at the top sent the company shares down 4.5%.
Shares are currently trading around at $88, which means the stock is down over 70 percent from the fall of 2020 when the Chinese government’s crackdown on big tech shook the market.
Former CEO Daniel Zhang is reportedly stepping down to focus more on the spinoff of Alibaba’s cloud unit. This is a dubious fact given that Zhang was never a consensus candidate to run Alibaba. Zhang moved into the role in September 2019 and the succession news was not uniformly positive on company shares.
Zhang’s departure could send a strong signal to investors that Alibaba’s constituent pieces are getting broken up as conglomerates tend to behave when financial values are depressed due to individual performance below their full potential or simply when investors seek alternative means by which to achieve better returns on their investments. in this case, the shakeup only confirmed what the company had announced it would do months earlier: to conduct a full spinoff.
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Revenues at Alibaba’s China commerce group fell 3% in the March quarter, but other divisions that represent just 1/3rd of the total, namely international commerce, logistics, and digital media, are on a positive growth path.
Investors should be able to buy directly into several of those other businesses.
In May, Alibaba provided additional details on its reorganization, saying that an initial public offering (IPO) of its Smart Logistics group and its Freshippo retail chain was in the works, and plans to spin off its cloud division into a separate company.
Seven weeks after Alibaba announced its historic restructuring plan to split itself into six independent companies, it is gearing up to spin off its cloud intelligence group, aiming to complete the transition by the same time in 2024. The cloud business generated $2.7 billion in revenue in Q1 2023, adding up to  9% of Alibaba’s total revenues.
Alibaba is preparing to raise external capital as it gears to activate the process of eventually spinning off the company. Given the long history of U.S.-Chinese tensions, the stellar financial performance of Alibaba whereby it reported $134.6 billion in revenue for the fiscal year ended in March 2022, could outweigh the risks and ease investor nervousness about buying into a U.S.-listed Chinese tech company.
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