Alibaba, Softbank Shares Surge on Chinese Tech Giant’s Restructuring

  • Shares of Alibaba and its major shareholder Softbank surged in Asian hours on Wednesday.
  • That’s after Alibaba announced a massive company restructuring on Tuesday.
  • Analysts say Alibaba’s split into six units will unlock the value of the company.

Alibaba’s massive restructuring plan announced Tuesday is boosting hopes that China’s crackdown on the tech sector is finally ending — and this sent shares of the e-commerce giant surging.

The Hong Kong Stock Exchange-listed shares rose as much as 16% on Tuesday, closing 12% higher at 94.55 Hong Kong dollars, or about $12.

Shares of Softbank — a major shareholder owning a 13% stake in the Chinese tech giant — also closed just over 6% higher at 5,190 Japanese yen on the Tokyo Stock Exchange.

The rally follows Alibaba’s announcement of a major reorganization, which will see the company split its business into six independently operated units covering cloud, Chinese e-commerce, global e-commerce, digital mapping and food delivery, logistics, and media and entertainment. Each unit will have its own board and CEO and will be able to explore funding and listings. 

Even Alibaba co-founder Jack Ma recently returned to mainland China after first disappearing from public just as Beijing started to crack down on the tech sector in late 2020. At the time, Ma had angered Beijing with a speech criticizing China’s financial regulatory system.

Ma’s return was seen as a signal that Beijing may be taking a friendlier stance toward private enterprises and is ready to end the regulatory scrutiny on powerful big tech companies.

“Baba’s breakup may be an important experiment,” Bank of America analysts wrote in a Tuesday note seen by Insider, referring to Alibaba’s stock symbol on the New York Stock Exchange. As China has “always required its biggest sectors and firms to ‘contribute to the society,'” Alibaba’s split could address various concerns including anti-trust and policy risks, the bank suggested.

Alibaba itself could also be seeking more lenient regulatory oversight with the split, wrote Oshadhi Kumarasiri, an equity research analyst at LightStream Research.

“This could potentially allow each entity to operate under a more manageable regulatory framework, rather than having one large entity that may be subject to more stringent regulations,” Kumarasiri wrote in a Wednesday note published on the Smartkarma research platform.

The separation of business units also limits the impact of unit-specific factors to the entire group, Shawn Yang, the deputy research head at Hong Kong-based Blue Lotus Research Institute, wrote in a Wednesday note published on the Smartkarma research platform.

Alibaba shares on the New York Stock Exchange were down 1.1% in pre-market trade.