BABA stock rose Tuesday after Alibaba (BABA), a pioneering move, announced that it would split into six companies. Each company will be independent and can raise funds or explore initial public offerings.
According to the China-based ecommerce giant, six groups will be covering local services like food delivery. They will also be covering e-commerce, digital marketplaces and the cloud.
"At 24 years old, Alibaba is welcoming new opportunities for growth," said Daniel Zhang, Alibaba Chief Executive. He stated that the market is the best test and that each business can seek independent funding and IPOs when it is ready.
Alibaba's major divisions, including media and e-commerce, will be freed up to move to the cloud. Alibaba stated that the move was "designed to unlock shareholder value, foster market competiveness"
BABA Stock: China Loosens the Reins
BABA stock shot up 9.5% to 94.16 during morning trading today on the stock exchange.
This reorganization occurs at a moment when Beijing is beginning to ease up on what has been an extremely restrictive regulatory environment. It focuses mainly on China internet companies that started more than two years ago and which have held back BABA stock.
Alibaba's six business units will each have its own chief executive, and they will report to their respective boards of directors. Alibaba stated in a statement that they will be responsible for their performance.
It also stated that Alibaba will continue to own the domestic e-commerce company. Zhang will also continue to lead the parent company.