- According to Fitch, Alibaba Group Holding Limited's BABA new organizational and governance structure should enable its businesses to respond more quickly to competition, strengthen management's accountability and increase transparency to regulatory authorities.
- Fitch does not expect the new structure to bring about an immediate change in Alibaba's credit profile.
- Fitch believes Alibaba's new organizational and governance structure can create value for the company.
- The individual businesses, if managed well, may respond more swiftly to market changes and promote innovation and deploy capital more efficiently, which could boost their profitability and cash generation in the longer run, provided synergy losses due to greater independence are limited.
- Compared to the former centralized management structure, they should have greater flexibility to set and execute their strategies.
- Alibaba may also be able to unlock value via spin-offs or IPOs that could boost the company's credit strength.
- Fitch does not expect the structural subordination of Alibaba's current debt to become a material credit issue or that it would lose access to subsidiary cash flow because it does not intend to reduce its stake in its core marketplace business.
- Late in March, Alibaba shared plans to form six business groups and other investment segments, each independently managed by its CEO and board of directors.
- Price Action: BABA shares are trading higher by 0.39% at $98.77 premarket on the last check Tuesday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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