Alibaba, the e-commerce giant often dubbed as the "Amazon of the East," has announced its plans to split into six different business units.
The move comes after facing intense regulatory scrutiny that has affected the company's stock value. In an attempt to create more value, Alibaba's management believes that breaking up the conglomerate into smaller, more focused entities will allow each business unit to thrive independently.
The restructuring will transform the company from a conglomerate to a holding company, with each subsidiary potentially becoming a publicly traded or externally financed entity.
Stocks tend to be valued at multiples applied to their least exciting business unit, and by separating its booming cloud business from its retail segment, Alibaba aims to preserve its higher multiples.
Investors have reacted positively to the news, as the split is expected to unlock value and increase transparency. The move also allows Alibaba to better compete with other major technology companies, such as Amazon.
As the industry watches Alibaba's bold move, only time will tell if the company's decision to emulate Alibaba from the famous tale of Ali Baba and the Forty Thieves will lead to greater fortunes and success.