Alibaba refused to spin off its cloud business into a separate company
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Alibaba Group will not spin off its cloud business into a separate company with its subsequent entry into the stock exchange. This became known from financial report Chinese Internet giant for the third quarter of the year.
The spin-off of the cloud business into a separate company was part of Alibaba Group’s large-scale reorganization plan. announced in March of this year. It was then reported that the company would split into six parts and then hold an IPO for each of them. The six business groups Alibaba planned to split into include Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group and Digital Media and Entertainment Group.
However, as noted in today’s report, the group’s management has changed its mind about separating the cloud business into a separate structure due to tightening sanctions from the United States. “In October 2023, the United States expanded its export controls to further restrict exports of advanced computer chips and semiconductor manufacturing equipment to China. “We believe that these new restrictions could materially and adversely affect Cloud Intelligence Group’s ability to offer products and services and fulfill obligations under existing contracts, thereby adversely affecting our results of operations and financial condition,” the report said. “We believe that a complete spin-off of Cloud Intelligence Group may not have the desired effect of enhancing shareholder value. Accordingly, we have decided not to pursue a complete spin-off and will instead focus on developing a sustainable growth model for Cloud Intelligence Group in a volatile environment.”
After the announcement of the refusal to spin off Cloud Intelligence Group into a separate company, Alibaba shares on the NYSE fell by more than 8%.
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