We reported earlier this week that China’s Alibaba shared its plans to split itself into six different companies all having a different purpose and also giving them the option to release an IPO later on which means that each of these companies will have their own board of directors as well as CEO and Chairman. This also means that the company will have much more room to grow as compared to Alibaba which everyone believed had become too big to grow anymore. Due to this reason, after the announcement, investors were happy and welcomed the decision of Alibaba Group.
Now, we see the same has been announced by Chinese e-commerce giant JD.com as well. JD.com revealed that it plans to spin off some of its properties and industrial units and also list them on the Hong Kong stock exchange. Obviously, similar to Alibaba’s announcement, the JD.com announcement was also received well by the investors as its shares rose by 5.4% to HK$172 on Friday. JD.com announced that it plans to list JD Property and JD Industrials by separating them from the main company on the HKSE. JD.com will continue to hold majority stake of 50% in the two companies with the other stakes being sold.
An investment strategist talking about the JD.com announcement said, “It’s positive as investors regard the measures as beneficial for enhancing their efficiency and releasing the potential [of the subsidiaries],”. The strategist also said that such a move from Alibaba and JD.com can prompt the other giants in tech industry to spin off their businesses and unlock the potential for investors. Also, this could mean that the scrutiny on these companies by the Chinese government can be eased to a greater extent.
JD.com also said in their statement, “The proposed spin-offs are also subject to approvals by regulators and the boards of directors, shareholders of JD.com and the subsidiaries”. However, we do know that such an announcement can’t be made without the consent of its board of directors and shareholders so we already know that the plans are already in place and it could be just a matter of time.