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Photograph by Justin Chin/Bloomberg
Alibaba
’s
plan to split itself up into six parts has been cheered by investors who see it as a pathway to unlocking value in the Chinese tech giant, whose stock has been battered in the past two years amid a wave of regulatory pressures.
Alibaba
(ticker: BABA) stock jumped 14.3% on Tuesday, its best day in many months, after the group said it would split into six units and open the door to these subsidiaries going public on their own. Set to open around $98, the stock is on a tear—though far below its peak above $300 notched in late 2020. That might change.
“From an investor sentiment impact perspective, we liken Alibaba’s reorganization to Google’s transformation to
Alphabet
,
a clear sentiment booster that should drive near-term stock price,”
J.P. Morgan
analysts led by Alex Yao wrote in a Wednesday note. “Nonetheless, we believe Alibaba’s reorganization could bring about more significant implications to business fundamentals and share price over the mid-to-longer term.”
That’s putting it mildly. J.P. Morgan is eyeballing the shares at $210 each in a “blue sky scenario,” the result of a sum-of-the-parts valuation analysis.
It’s reason alone for investors to like the split plan. It could also spur similar action from Chinese tech peers and others, and could be a signal that the regulatory backdrop in China is improving more broadly.
Write to Jack Denton at jack.denton@barrons.com
