To The Moon

Shares of Alibaba $Alibaba(BABA)$ $Alibaba(09988)$ rose as much as 5% on Monday after news of Jack Ma's return to China was announced, but fell back high on the same day.

On Tuesday, Alibaba announced major organizational changes.

At the heart of this revolution is 1+6+N. That is, under Alibaba Group, set up six major business groups and a number of companies, such as Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group and Digital Media and Entertainment Group.

These business groups and companies set up boards of directors respectively, and qualified business groups and companies have the possibility of independent financing and listing in the future!

The news sparked a riot in Alibaba shares, sending Hong Kong shares up nearly 15% at one point. Tencent $TENCENT(00700)$ $Tencent Holding Ltd.(TCEHY)$ , Kuaishou $KUAISHOU-W(01024)$ and other tech stocks and Hang Seng Science and Technology Index $HSTECH(HSTECH)$ soared!

Organizational change has been well received by analysts

CICC analysts believe that after each business group is independent, it may start a separate listing process, which is expected to reshape Alibaba's valuation system. After the segment valuation calculation, CICC believes that the reasonable valuation of Alibaba is $ 418.2 billion, which is still 64% higher than the current one.

Soochow Securities analysts are more optimistic, as a tech leader, they think the exemplary role of Alibaba organizational change is expected to trigger an iterative wave of corporate governance in Chinese stocks, and bring new opportunities to the entire Hang Seng tech sector.

Changes in corporate governance will significantly increase the value of Internet companies.

Restructure will have limited impact on Alibaba's share price

Contrary to the optimistic expectations of analysts, I personally think that Alibaba's organizational changes will not stimulate the stock price.

First of all, Alibaba proposed to change at this time, inevitably because the current development encountered problems. At present, the problem of Alibaba is very obvious, that is the core e-commerce business has encountered a bottleneck.

From the macroeconomic point of view, consumer spending is very cautious, Alibaba's main business has been subject to headwinds.

From the perspective of competitors, even though Alibaba has been the overlord of e-commerce, it still failed to stop the rise of JD.com $JD.com(JD)$ $JD-SW(09618)$ and Pinduoduo $Pinduoduo Inc.(PDD)$ . Even, Pinduoduo's current momentum poses a great threat to Alibaba.

After dealing with JD.com and Pinduoduo, the live e-commerce represented by Douyin has become increasingly powerful.

On the contrary, in addition to e-commerce, Alibaba Cloud has gone through a period of rapid growth, it is deeply bound to the Chinese economy in the future, and faces competition from Amazon $Amazon.com(AMZN)$ , Microsoft $Microsoft(MSFT)$ , Google $Alphabet(GOOG)$ $Alphabet(GOOGL)$ and other giants for overseas expansion.

Local Life business is mainly Ele. me. The current food delivery market is almost monopolized by Meituan $Meituan(03690)$ . Ele. me is only surviving on the support of Alibaba Group. If it does go independent, how will it compete with Meituan?

Although Cainiao logistics is growing well at present, the logistics industry is heavy on assets and is not favored by the capital market. Coupled with the existence of strong competitors such as SF Express and JD.com, how much benefit can Cainiao independence bring to Alibaba's stock price?

Therefore, the real beneficiary of Alibaba's change is the mainly e-commerce business, leaving the rest self-reliance. Mr. Zhang may be able to devote more energy to competing with JD.com and Pinduoduo.

But this positive need to see the effect of long-term operation, the stimulus effect on the stock price needs financial data to verify.

It is difficult to achieve 1+1 > 2 in the fundamental split, can Alibaba's equity value be enhanced after the independent listing of the subsidiary?

In theory, although Alibaba Cloud has slowed down, the outlook is still better than others and should enjoy a higher valuation. A separate listing must be much better than staying in Alibaba Group, and there are many such examples in the Hong Kong stock market.

So is the restructure really as strong a stimulus to Alibaba's share price as it seems? I doubt it!

Look calmly at the impact of change on other Chinese stocks

Alibaba can be split because it has a large number of businesses, and there is a big difference between each other. For example, Alibaba Cloud and Cainiao, such as Ele.me and Youku, their business cooperation is not high, so it is worth breaking up.

As for other tech stocks, such as Tencent, what can it be split? Is it necessary to split up products such as wechat, QQ and Tencent Video? At present, Tencent's businesses are mainly advertising, games and finance, advertising business has applications in various products, how to split?

JD.com has long listed JD Health and JD Logistics separately.

Therefore, the surge in the Hang Seng Science and Technology Index caused by Alibaba's organizational change can only be short-lived. Tencent, JD.com and Baidu $Baidu(BIDU)$ $BIDU-SW(09888)$ are also coming out of the trend of going high and falling.

Breaking up to boost stock prices is a game you can play for a while, but it doesn't solve the main problem!