Alibaba's spin-off listing faces obstacles.
Plans can't keep up with changes.
Alibaba's plan to split and go public has encountered obstacles just six months after its high-profile announcement.
On November 16th, Alibaba released its Q2 earnings report, revealing several key pieces of information. The most notable was the suspension of the planned spin-off and IPO of Hema, as well as the decision to no longer pursue a complete separation of Alibaba Cloud.
This means that Alibaba's plan for a split IPO is not going as smoothly as expected. There have been unforeseen factors at play and significant changes in the external environment.
In March of this year, Jack Ma, who had been out of the public eye for a long time, returned to China with years of deep reflection. He led the largest organizational transformation in Alibaba's history, announcing the "One-to-Six" plan. Under the umbrella of Alibaba Group, six major business groups were established, including Alibaba Cloud Intelligence, Taobao and Tmall Commerce, Local Services, Cainiao, International Digital Commerce, and Digital Entertainment. All of these were intended to be spun off and listed separately.
Alibaba acted swiftly and established a Capital Management Committee to enhance shareholder value.
On May 18th, Alibaba's 2023 earnings report clearly outlined the timeline for the IPOs of Cainiao, Alibaba Cloud, and Hema. The plans were to complete the IPOs within the next 12 to 18 months, 12 months, and 6 to 12 months, respectively.
However, plans have been disrupted. Cainiao, which was expected to be the slowest, was the first to take action. On the evening of September 26th, Cainiao submitted its IPO application to the Hong Kong Stock Exchange, firing the first shot in Alibaba's One-to-Six spin-off plan. Market sources indicate that Cainiao aims to raise at least $1 billion.
However, there have been significant changes for the other two businesses with scheduled IPOs. Hema's IPO has been postponed, and Alibaba Cloud is no longer pursuing a complete separation, which means an independent IPO is also on hold.
Regarding the cloud business, Alibaba stated in its earnings report that recent US restrictions on the export of advanced computing chips have brought uncertainty to the prospects of Alibaba Cloud Intelligence. The company believes that a complete separation of Alibaba Cloud Intelligence may not enhance shareholder value as originally envisioned. Therefore, it has decided to no longer pursue a complete separation and instead face the uncertain environment while focusing on building a sustainable growth model for Alibaba Cloud Intelligence.
Just a few days ago, Alibaba Cloud experienced a technical failure that caused an outage for about two hours. It is unclear whether this incident influenced the decision to postpone the spin-off.
Alibaba stated that in the era of AI, Alibaba Cloud requires long-term strategic investment more than ever. Alibaba will firmly increase its investment in Alibaba Cloud, allowing it to focus solely on the development strategy of "AI + Cloud Computing" and minimize the adverse impact of uncertainty on future development.
Insiders close to Alibaba analyze that companies must dynamically assess rapidly changing market environments and respond flexibly during their development. The arrival of the AI era presents Alibaba Cloud with new development opportunities, and the most steadfast investors undoubtedly lie within Alibaba Group. By no longer pursuing a complete separation and instead increasing strategic investment, Alibaba is making the most favorable decision for the future development of Alibaba Cloud and the realization of shareholder value. However, as a long-term plan or trend, the spin-off and listing of Alibaba's other businesses will continue. This means that Alibaba Group's identity is starting to change, becoming more of a holding company engaged in capital management, and the overall market value of the Alibaba ecosystem will also see a significant increase.
For Alibaba, this is an evolutionary process and a continuous effort to enhance shareholder value.