Alibaba Group Holding BABA is breaking its major business components into separate companies, in one of the largest corporate reorganizations in history.
The stock soared on this news Tuesday, with investors excited about the potential to invest in different areas of the company, such as Alibaba’s growing cloud computing service.
Each side of the business is expected to have its own CEO, own fundraising and potentially, its own initial public offerings (IPOs). The company says that this will help departments become more agile and make decisions quicker.
Alibaba’s reorganization is a sign that China’s government is warming up to companies and open to more IPOs down the road, according to Fox Business' Susan Li.
“It means Beijing has given their blessing for future Alibaba IPOs,” Li said during a broadcast, adding that a move is a sign that China’s government is “warming to tech.”
Investors were spooked in 2020 when the Chinese government shut down Alibaba’s plans for an Ant Group IPO. Worry grew that China was clamping down on its own companies. But, the Alibaba breakup shows the government is taking a turn.
If it is true that the Chinese government is becoming more business-friendly, other companies outside of Alibaba will benefit as well. Companies like Tencent Holdings TCEHY and JD.com Inc JD might become more attractive to investors as they feel more at ease about China’s regulatory environment.
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