Shares of Alibaba Group Holding Ltd (NYSE: BABA) opened more than 10% up on Tuesday after the tech behemoth announced plans of reorganising into six businesses.
Details of the restructuring plan
The Chinese multinational expects to unlock significant shareholder value as it splits into the following units:
Cloud Intelligence Group
Taobao Tmall Commerce Group
Local Services Group
Cainiao Smart Logistics Group
Global Digital Commerce Group
Digital Media and Entertainment Group
Each of these groups will have its own board of director and a chief executive. Daniel Zhang, though, will remain the CEO and Chairman of the overall company. In his letter to employees, he wrote:
Each company can pursue independent fundraising and IPOs when they’re ready. This will empower all our businesses to become more agile, enhance decision-making and enable faster responses to market changes.
Versus its year-to-date high, Alibaba stock is still down more than 20%.
Is Alibaba stock worth investing?
In January, activist investor Ryan Cohen built a stake in the Hangzhou-headquartered firm as Invezz reported HERE. Alibaba Group will likely get to relish regulatory advantages with the new structure as well.
Reacting to the announcement, Baird analyst Colin Sebastian reiterated his “buy” rating on Alibaba stock. His $120 price objective suggests about a 30% upside from here.
Alibaba’s Cloud, Logistics, and International Commerce units may be worth more as individual entities rather than components of Alibaba Group.
Last month, Alibaba reported its financial results for the third quarter that handily topped Street estimates.
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