Alibaba will consider ceding control of some of its businesses if they choose to join in a split into six semi-autonomous units, executives have said as the Chinese tech group plans its biggest restructuring in years .
“After the IPO, we will continue to assess the strategic importance of these companies to Alibaba, and based on that we will decide whether or not to retain control,” chief financial officer Toby Xu said on a call. to investors on Thursday.
The Tuesday group announced a redesign which would divide it into six business units, with their own chief executives and controlled by a holding company. Each unit would be allowed to bring in outside capital and possibly pursue its own IPOs.
Chief Executive Daniel Zhang said that while the split mirrored the lines of its existing business groups, the relationship between Ali Baba and his units would change.
“Alibaba will be more in the nature of an asset and capital operator than a business operator,” he said. “Each company in the group of companies will have its own corporate entity. . . we expect these changes to unleash more vitality in our business units.
Xu said Alibaba will also continue to sell some of its outside investments. “We will continue to monetize some of the less strategic investments in our investment portfolio in order to improve our capital structure,” he said, adding that the group would also continue to buy back its shares as part of A $25 billion program previously authorized.
The e-commerce-led group has already sold stakes in some of its portfolio companies, offloading all of its shares in Indian digital payments provider Paytm, which were valued at $310 million at the end of last year, via two block trades since January. Alibaba’s fintech subsidiary, Ant Group, still owns a 25% stake in Paytm.
The decision to trim Alibaba’s investment portfolio mirrors action taken by rival Tencent, another major funder of tech start-ups, which is sell assets under pressure from regulators worried about his enormous influence in the sector.
Morning Star analyst Chelsey Tam, in a note to clients, predicted that Alibaba’s business units could “meet the listing requirements of the Hong Kong Main Board Listing Rules,” which include revenue targets, of profits and management, after three years.
Alibaba did not provide a timeline for when units might seek outside capital or publicly list. Holding group Alibaba will retain full ownership of online shopping platforms Tmall and Taobao, which generated more profits than the group as a whole in its last fiscal year.
Xu also acknowledged there had been little movement on the group’s plan to convert its secondary listing in Hong Kong to a primary listing, originally scheduled for the end of 2022.
“We will continue to assess market conditions and external circumstances, it will take time but we continue to make this assessment,” he said.
The move to a primary listing would lay the groundwork for other mainland Chinese investors to buy its shares, but it would also expose the company to stricter disclosure requirements and likely require its executives to report their personal sales of Alibaba shares.
Lax rules for foreign issuers, including Alibaba in the United States, currently exempt its executives from making information public. Alibaba in November also attributed part of the delay to the need to create a new equity compensation plan for employees.