Anyone who thinks Amazon has a wide range should take a look at the Alibaba shop: you can find everything here – from used ATMs and food trucks to baby food and contacts in Chinese factories. The whole thing is controlled by numerous background processes: artificial intelligence, logistics or even marketing. How many divisions Alibaba actually has is not so clear. But according to Alibaba itself, there are exactly six. The Chinese company now wants to split itself into so many individual parts.

The news surprised markets around the world on Tuesday. On Wall Street, Alibaba shares at times rose by almost 15 percent; the hope that the almost two-year sell-off of the papers could now end was awakened. Investors had repeatedly demanded that Alibaba should spin off individual parts of the company and list them on the stock exchange. Even the biggest optimists were surprised that there should now be six. "We believe that the reorganization will lead to reacting more quickly to market changes and improving decision-making," explained Jefferies, for example. Overall, the sum of the new individual parts is worth more than the old Alibaba conglomerate. Bloomberg even reported on the new power of the "Baby Babas".

The Chinese company has identified six growth areas: cloud, media, logistics, local retail, e-commerce and digital. Each of these sub-areas will have its own CEO, should be allowed to raise outside capital independently and aim for an IPO. This is what CEO Daniel Zhang announced on Wednesday.

To what extent the decision was made voluntarily, however, may be questioned. In the past two years, Alibaba has lost around $500 billion in market value and is now worth just $250 billion. The company was under pressure from several sides: on the one hand from the strong competition in the USA with Amazon and in China with JD.com, on the other hand from supervisory authorities who accuse Alibaba of market-damaging behavior and have therefore already sentenced it to billions in payments.

The political component in particular is of great importance to Alibaba: After founder Jack Ma made critical comments about regulation in the country in November 2020, Alibaba only went downhill. First, Chinese President Xi Jinping stopped the IPO of Alibaba's fintech subsidiary Ant Financial, triggering the sell-off of Alibaba shares. At the same time, Xi's government began heavily subsidizing its biggest competitor, JD.com -- for example, to win price wars.

Jack Ma then withdrew from the public as far as possible, he is said to have spent most of his time in Japan, Israel and the USA. In January 2023, he is said to have given up control of the Ant Group. Nevertheless, the recent price rally also has something to do with him – because Ma surprisingly reappeared in China on Tuesday, he is said to have spoken about artificial intelligence in a school he founded. The fact that Alibaba then announced its new strategy a day later was seen by analysts as a sign of relaxation with the Chinese government. For their part, they have an interest in appearing as a reliable partner for private investors, and demonstrate this with the example of Alibaba.

In a way, Alibaba is now even following its state-sponsored competitor JD.com, which has spun off individual parts of the company for some time and has already successfully placed some of them on the Hong Kong stock exchange. Even larger rival Tencent is pursuing a similar strategy. Companies are also aiming to mitigate regulatory risks by not putting everything on the China card.

Given its history, it is obvious that Alibaba is also pursuing this goal. And a manager told the "Financial Times" that the six Alibaba subdivisions have been working for themselves for a long time in order to be able to handle a quick IPO. "The statement by the management did not surprise anyone internally," said the manager.

Analysts were still surprised by the scope, but were positive. Goldman Sachs, for example, estimates that the total for the individual parts equates to a current stock price of about $137, up well from Monday night's $86 level. The e-commerce business in particular is particularly valuable. Barclays and Bank of America took a similar view.

This article first appeared here at Capital.de.