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Chinese tech giant Alibaba abruptly withdrew its plan on the 16th (local time) to spin off its cloud service division and go public. The company cited changes in the business environment due to the U.S. government’s control over semiconductor exports to China, suggesting that the conflict between the U.S. and China is having a significant impact on Chinese companies. Additionally, news that Jack Ma, the founder of Alibaba, sold a large portion of his stake caused Alibaba’s stock price to plummet by more than 9%.
Nihon Keizai Shimbun and Bloomberg reported that Daniel Zhang, Chairman of Alibaba Group, and Maggie Wu, CEO, announced that they need to “reset Alibaba’s strategy.” Following the news, Alibaba’s stock price on the New York Stock Exchange (NYSE) plummeted by 9.14%.
In her first public speech since taking office, CEO Wu said, “As the U.S. strengthens control over semiconductor exports to China, we had to reconsider our plan to separate business divisions that have been in progress for decades,” and “Uncertainty has arisen in the outlook for the Cloud Intelligence division.” Instead of executing the plan to go public after the spin-off, she added that they would focus on developing a sustainable growth model considering the situation.
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Alibaba announced plans in March to split the company into six businesses according to their divisions and go public separately. Among them, the cloud service division aimed to complete the spin-off and go public by May next year, but this has been withdrawn. Chairman Zhang emphasized in a conference call, “The situation has changed. Now is the time to accumulate cash for investment.” Kevin Net, the head of Asia equities at Talkville Finance, said, “I thought the entire Alibaba restructuring plan could be at risk. It’s quite surprising.”
Bloomberg pointed out that “The Biden administration’s implementation of export controls on AI chips, which are crucial for high-end computing and cloud data center operations, did not help Alibaba.” Alibaba’s cloud service division’s revenue was 27.65 billion yuan in the third quarter, a mere 2% growth compared to the same period last year.
Additionally, founder Ma decided to sell a large portion of his Alibaba stake held in the form of a family trust through a subsidiary. Reuters reported that Alibaba’s subsidiaries, JC Properties and JSP Investment, announced to the U.S. Securities and Exchange Commission (SEC) that they plan to sell 5 million shares each of Alibaba by the 21st. Both companies held Ma’s stake in Alibaba in the form of a family trust. The market value of the Alibaba stake being sold this time reaches $870.7 million based on the closing price on the 15th.
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