Alibaba’s CFO Sees Multiple Ways To Boost Shareholder Value Beyond Share buybacks

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Alibaba’s CFO Sees Multiple Ways To Boost Shareholder Value Beyond Share buybacks

  • Alibaba to continue buyback program; sees other options to enhance value
  • Group to maintain control of core business units in immediate future

Alibaba Group’s Chief Financial Officer Toby Xu said he sees multiple ways the group can enhance shareholder value going forward, on top of the existing shareholder buyback program.

The Hangzhou-headquartered internet giant will continue to monetize less strategic assets in its investment portfolio to improve its overall capital structure, said Xu.

“Our commitment to the existing share repurchase program has not changed,” said Xu on Thursday’s conference call with stock analysts. Alibaba has a $40 billion buyback running until March 2025.

Alibaba unveiled a sweeping reorganization earlier this week designed to unlock shareholder value and foster market competitiveness. Alibaba will become a holding company, freeing business units to seek an initial public offering.

“As these business units become independent companies, as they potentially go IPO, there’ll be even more ways that we can enhance value for shareholders,” said Xu, who will remain as CFO of the holding company after the group’s reorganization.  

Toby Xu sees multiple ways to unlock shareholder value, beyond share buybacks
Toby Xu sees multiple ways to unlock shareholder value, beyond share buybacks. Photo credit: Alibaba Group

Maintaining Control — For Now

As the majority shareholder of its core business units, Alibaba Group will continue to wield control over their boards of directors. However, it will reassess ownership if and when the business groups pursue IPOs.

“After going public, we will continue to evaluate the strategic importance of these companies to Alibaba. And on that basis, we will decide whether or not to continue to retain control,” said Xu.

The exception is Taobao Tmall Commerce Group, the group’s largest and most profitable business, which will remain an Alibaba Group wholly owned unit.

“We view BABA’s reorganization plan as positive, from both equity valuation and business competitiveness perspectives,” said BofA stock analysts including Joyce Ju in a report to investors.

Over its 24-year history, Alibaba has cultivated synergies within its ecosystem, such as data ownership, consumer relationships and technology. The group did not mandate these ties and shared resources by administrative order, but let them grow organically based on business units’ perception of value, for example, most Alibaba businesses host their operations on Alibaba Cloud. These relationships will likely stand the test of any market listings, said executives on the call with analysts.  

Hong Kong Listing

Regarding its primary listing in Hong Kong, Alibaba will continue to evaluate the market and other external conditions.

Alibaba disclosed its reorganization just ahead of its new fiscal year starting on April 1. Strategy and business planning for the business groups began in sync with the annual planning cycle.

“With the transition into the new structure, the management teams of the business groups will be working on planning and mapping out strategy, of course, not just for the coming year, but for the coming years,” said Daniel Zhang, Alibaba Group’s Chairman and CEO.

For more news on Alibaba’s restructuring see here

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