4 ms·

The media and HN seem to be seeing this as a AT&T style breakup, which is not. It is starting with an Alphabet style restructuring, which sounds big in theory b

The media and HN seem to be seeing this as a AT&T style breakup, which is not. It is starting with an Alphabet style restructuring, which sounds big in theory but nothing big might happen in practice. The biggest unit (Taobao/Tmall) will be fully owned by Alibaba and would not seek any external investment (Taobao/Tmall is responsible for >70% of their profits). The new Unit CEOs were not even invited to speak at the announcement. Even if all the new Units sell 10-20% stock to the market, would it really change too many things? It will all depend on how the CCP wants the breakup to play out.

eloff 4y ago
Also the reason the stock jumped on the news is the company is potentially worth more this way, by breaking out higher margin / faster growth units from the big retail business. A lot of Amazon investors would love to see the same with AWS. It sounds silly since nothing really changes, but it has to do with the way investors calculate the value of public companies.
- crop_rotation 4y ago
  This sounds good in theory but might not work in practice. None of them are profitable and depended on Tmall/Taobao for growth. Turning to the public markets would require sacrificing growth for profitability. There might be many other inter dependencies which might turn out costly to unwind. What you are saying might be how it turns out in the end, but it is not a given.
  - eloff 4y ago
    Yes, nothing is a given when it comes to the stock market.
  - pclmulqdq 4y ago
    Endless growth of unprofitable services is what has given us crazy market distortions in the past. It's what gave us things like Groupon, Doordash, and Uber, too. Growth isn't always a good goal.
- ttobbaybbob 4y ago
  a basket of options is more valuable than an option on a basket https://medium.com/@kentbeck_7670/decisions-decisions-or-why-baskets-of-options-dominate-9ac63658b593 https://medium.com/@kentbeck_7670/decisions-decisions-or-why...
- cstrat 4y ago
  Yeah I saw this happen with a business I was involved with. Split up each business could be valued with direct competition in market and the same PE ratios applied to evaluate value and market cap. It caused a noticeable jump in overall stock value while nothing actually changed other than how businesses reported to the market.
  - bobbylarrybobby 4y ago
    Does this mean it was undervalued beforehand? Are companies in the “before” scenario generally undervalued?
zoom6628 4y ago
Agreed. This is a restructure so that CCP can show they have caused changes and for Alibaba to appear to acquiesce to instructions. Corporate “window dressing” basically. If the units all get too independent, based on my view at ground level in China, is that they will all get more powerful in their respective markets. Nobody was happy with the value erasure.
- dirtyid 4y ago
  >Nobody was happy with the value erasure. On the other hand a fuckton of value has been irrevocably erased - entire ed tech sector isn't coming back to pre crackdown levels. If anything CCP hasn shown little regard for crippling soft tech since it will redirect talent towards strategic hard tech where job and wages have been booming. Baba getting proper rectification if it incentivizes future talent to reorient towards SMIC seems to be part of the plan.
  - bigcat12345678 4y ago
    The ed tech industry is a CCP charged indoctrination dystopian touche rig It's demise is a self reflection on the beyond limit of control that has to be relieved for the long term stability The ed tech industry's value is about meaningful as the scam industry

eloff 4y ago

Also the reason the stock jumped on the news is the company is potentially worth more this way, by breaking out higher margin / faster growth units from the big retail business. A lot of Amazon investors would love to see the same with AWS. It sounds silly since nothing really changes, but it has to do with the way investors calculate the value of public companies.

crop_rotation 4y ago
This sounds good in theory but might not work in practice. None of them are profitable and depended on Tmall/Taobao for growth. Turning to the public markets would require sacrificing growth for profitability. There might be many other inter dependencies which might turn out costly to unwind. What you are saying might be how it turns out in the end, but it is not a given.
- eloff 4y ago
  Yes, nothing is a given when it comes to the stock market.
- pclmulqdq 4y ago
  Endless growth of unprofitable services is what has given us crazy market distortions in the past. It's what gave us things like Groupon, Doordash, and Uber, too. Growth isn't always a good goal.
ttobbaybbob 4y ago
a basket of options is more valuable than an option on a basket https://medium.com/@kentbeck_7670/decisions-decisions-or-why-baskets-of-options-dominate-9ac63658b593 https://medium.com/@kentbeck_7670/decisions-decisions-or-why...
cstrat 4y ago
Yeah I saw this happen with a business I was involved with. Split up each business could be valued with direct competition in market and the same PE ratios applied to evaluate value and market cap. It caused a noticeable jump in overall stock value while nothing actually changed other than how businesses reported to the market.
- bobbylarrybobby 4y ago
  Does this mean it was undervalued beforehand? Are companies in the “before” scenario generally undervalued?

zoom6628 4y ago

Agreed. This is a restructure so that CCP can show they have caused changes and for Alibaba to appear to acquiesce to instructions. Corporate “window dressing” basically. If the units all get too independent, based on my view at ground level in China, is that they will all get more powerful in their respective markets. Nobody was happy with the value erasure.

dirtyid 4y ago
>Nobody was happy with the value erasure. On the other hand a fuckton of value has been irrevocably erased - entire ed tech sector isn't coming back to pre crackdown levels. If anything CCP hasn shown little regard for crippling soft tech since it will redirect talent towards strategic hard tech where job and wages have been booming. Baba getting proper rectification if it incentivizes future talent to reorient towards SMIC seems to be part of the plan.
- bigcat12345678 4y ago
  The ed tech industry is a CCP charged indoctrination dystopian touche rig It's demise is a self reflection on the beyond limit of control that has to be relieved for the long term stability The ed tech industry's value is about meaningful as the scam industry