Alibaba Group Abandons Cloud Business Spin-Off Plans Due to US Chip Export Restrictions
Alibaba Group, a Chinese e-commerce giant, has decided to abandon its plans to spin off its Cloud Intelligence Group due to US restrictions on the export of advanced computing chips. The company cited uncertainties created by the recent expansion of export curbs as the reason for scrapping the spin-off.
In addition to the cloud unit spin-off, Alibaba has also postponed the initial public offering (IPO) of its Freshippo grocery company. However, the company expressed its intention to pursue external fundraising for its international digital commerce group arm. Alibaba’s logistics division, Cainiao, has applied to list in Hong Kong.
The announcement of the abandoned spin-off had a significant impact on Alibaba’s shares, which experienced an 8.4% decline in premarket trading. Investors had anticipated receiving separate shares of the cloud business and hoped for a higher valuation in the public markets due to its growth potential.
Alibaba’s decision to abandon the cloud business spin-off comes after the unexpected resignation of former group CEO Daniel Zhang in September. Eddie Wu, one of the company’s co-founders and a long-time lieutenant of former chief Jack Ma, was appointed as the CEO of both Alibaba and the cloud business.
Despite challenges and uncertainties, Alibaba reported second-quarter revenue of 224.79 billion yuan ($31.01 billion), meeting analysts’ expectations. The company’s international digital commerce arm reported a 53% rise in revenues, indicating strong international growth. Alibaba aims to maintain a “more nimble” structure to remain competitive amid evolving regulatory landscapes and global economic pressures.
Before announcing its earnings, Alibaba revealed in a regulatory filing that Jack Ma’s family trust plans to sell down its stake in the company, selling 10 million shares for $870.7 million in cash.
The e-commerce business was established in 1999 by Jack Ma, who had maintained a low profile since late 2020, when Beijing canceled Ant Group’s IPO after he criticized Chinese authorities. China fined Alibaba a record $2.75 billion for unlawful commercial practices.
