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Reaction to Alibaba's scrapping of cloud unit spin-off

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LA Post: Reaction to Alibaba's scrapping of cloud unit spin-off
November 16, 2023

HONG KONG (Reuters) - Hong Kong-listed shares of China's Alibaba Group plunged 10% on Friday, wiping about $20 billion off its market value, after the company scrapped plans to spin off its cloud business.

Alibaba said its decision to shelve the spin-off was due to uncertainties fuelled by U.S. curbs on exports to China of chips used in artificial intelligence applications.

Once Asia's most valuable stock worth around $830 billion in October 2020, the Hong Kong-listed shares fell more than 10% to a one-year low.

Following are what people are saying about the decision:


"I believe scrapping the cloud unit's IPO reflects a new development strategy implemented by the new leadership. This strategy is very different from the one set by previous leader Daniel Zhang.

"Such a move could further undermine investors’ confidence in Alibaba's management, which has already been shaken by the abrupt departure of Zhang earlier this year."


"Rather than spending the time on trying to spin out its Cloud Intelligence Business, the idea seems to be to double down on their attention and investment in the Cloud operations because with AI, timing is critical. If you miss the window, you might miss your opportunity to actually be a key player in the business.

"Honestly, look at the world we're in right now. With all the flux and uncertainty, it's easy to be reflexive and fall into a short-term mentality. But one of the hallmarks of Alibaba is that they do not let the fear of the investor reactions dictate whether they make a hard decision that is actually going to benefit the company in the long run. I saw that consistently while I was at the company, a willingness to take the short-term hit for the long-term gain. To me that's a hallmark of the company mindset."


"I think they are certainly exploring in the right direction, but certain assets may see better investor demand and fetch a more satisfactory valuation than others. In particular, I think it is quite understandable why investors have concerns about the original AliCloud IPO - growth and margins are both facing substantial headwinds and the competitive & geopolitical factors undermine visibility. Clearly not the best time for IPO.

"Nonetheless, I think the group should be given credit for giving the idea the best effort. Eddie Wu taking over as the division chief, the end of the previously announced price war, and deconsolidation of DingTalk from AliCloud are all right moves signalling constructive strategies and addressing investor concerns. Too bad that they were not enough."


"With the advent of AI, and Cloud being critical infrastructure to deliver AI services, it would make sense to keep the unit within Alibaba as it can then potentially invest and deliver better shareholder returns over time. In short, I think prior decisions to restructure and IPO certain business units will have to be reassessed based on prevailing market conditions. The international business is one of the few Alibaba units that’s growing fast, which puts it in a better position to explore external funding."

(Reporting By Casey Hall in Shanghai and Josh Ye in Hong Kong, Yelin Mo in Beijing; Compiled by Anne Marie Roantree; Editing by Muralikumar Anantharaman and Miral Fahmy)


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