SoftBank shares jump on Alibaba split-up plans

1:29 am Wednesday, March 29th, 2023

TOKYO (Reuters) – Shares in SoftBank Group Corp soared on Wednesday after Chinese e-commerce conglomerate Alibaba Group, in which the Japanese technology investor has a 13.7 % stake, announced a major restructuring plan.

SoftBank shares were up 5.6% in afternoon trade, on track to post the biggest percentage gain in five months. Alibaba shares were up 13.2%.

Alibaba said on Tuesday it was planning to split into six units and explore fundraising or listings for most of them, in the biggest restructuring in its 24-year history.

SBI Securities analyst Shinji Moriyuki said the split-up would probably prevent Chinese government scrutiny of any of Alibaba’s operations from affecting the rest of the group.

China’s unprecedented regulatory crackdown in the last couple of years on its marquee domestic companies – mainly in the internet, private education and property sectors – wiped off billions in market values and weighed on investor sentiment.

“Investors took heart from sense of uncertainty over Alibaba having been eased a little … there was a certain discount to SoftBank’s stake given the unclear direction of China’s internet sector,” Moriyuki said.

Alibaba said on Tuesday it would split into six units – Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group and Digital Media and Entertainment Group.

Alibaba itself would re-organise into a holding company structure, with Daniel Zhang retaining his position as group CEO, and with separate CEOs and boards for each of the six sub-divisions.

Ichiyoshi Asset Management director Mitsushige Akino said that investors chased SoftBank higher in light of a spike in Alibaba shares, but that it is too early to tell whether the revamp will bring lasting growth to the Chinese company.

“I’m not sure if a 5% rise (in SoftBank shares) can be justified. I believe buy orders, including short covering, are being placed in response to this new factor to trade on. We just have to wait and see how this really plays out,” Akino said.

(Reporting by Kiyoshi Takenaka. Editing by Gerry Doyle)