Yahoo News Alibaba Shares Surge on Restructuring News: ETFs in Focus
Chinese tech giant Alibaba (BABA) announced an important reorganization to split its company into six business groups. The company said that it seeks to “unlock shareholder value” with this move, as quoted on CNBC. Alibaba stocks jumped by more than 14% in the United States on Mar 28, following the news of restructuring.
Alibaba said Tuesday it will split its company into six business groups, each with the capability to raise funds independently and go public. Each business group will be managed by its own CEO and board of directors. Alibaba said in a statement that the move is “designed to unlock shareholder value and foster market competitiveness.”
The new groups will be Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics, Global Digital Commerce Group and Digital Media and Entertainment Group.
Alibaba has been striving with tougher tech crackdown from Beijing and slowing Chinese economic growth for long. Around $600 billion of value has been lost since Alibaba’s share price peak in October 2020, per CNBC. Alibaba’s fintech affiliate Ant Group was compelled by regulators to abandon its grand IPO in 2020. And in 2021, Alibaba was fined $2.6 billion as part of an antitrust probe.
What Lies Ahead?
The announcement could mark Alibaba’s turnaround in the coming days. Alibaba owns 33% of Ant, which operates AliPay, one of China’s two leading mobile pay apps, per CNBC. Kingston Securities' Executive Director Dickie Wong believes that “[Alibaba is] aiming for a bigger target,” as quoted on CNBC.
“In terms of the bigger picture, obviously would be Ant Group [being] re-introduced into the equity market,” Dickie Wong told CNBC’s “Street Signs Asia” on Wednesday. Notably, Alibaba reported robust third-quarter fiscal 2023 before the opening bell on Feb 23, wherein it beat the Zacks Consensus Estimate for both earnings and revenues.
Alibaba is likely to see faster revenue growth over the coming quarters, as the full effect of the Chinese economic reopening is felt. Management believes that the economy is "getting back on track" and "consumer confidence and business confidence are rising," which will provide a boost to the company’s revenues and earnings.
Market Impact
The news acted as a cornerstone for the entire Chinese tech space. Tencent Holdings Limited TCEHY, jumped about 8% while Baidu Inc. BIDU and JD.com JD gained more than 4% each.
China tech ETFs like KraneShares CSI China Internet ETF KWEB, Global X MSCI China Communication Services ETF (CHIC) gained about 4.3% and 1.5%, respectively, on that day.
Alibaba-heavy ETFs like ProShares Online Retail ETF ONLN, First Trust Dow Jones International Internet ETF FDNI, First Trust International Equity Opportunities ETF (FPXI) and Invesco Golden Dragon China ETF PGJ added about 1.7%, 3.1%, 1.7%, 3.2%, respectively, on Mar 28.
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