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Alibaba Group Holding Ltd. previously hoped spinoffs of various units would unlock shareholder value, but shares of the Chinese e-commerce giant were tumbling in Thursday’s premarket trading as the company said it would shelve some of those plans.
The company no longer intends to move forward with a full spinoff of its cloud-computing unit, it said alongside Thursday’s earnings. “The recent expansion of U.S. restrictions on export of advanced computing chips has created uncertainties for the prospects of Cloud Intelligence Group,” Alibaba
BABA,
noted in the release, and a spinoff “may not achieve the intended effect of shareholder value enhancement.”
Alibaba further disclosed that it has “put on hold” plans to conduct an initial public offering of its Freshippo (Hema) business “as we evaluate market conditions and other factors that would contribute to a successful transaction to enhance shareholder value.”
The Cainiao logistics business has applied for a Hong Kong IPO and submitted an AI filing there.
See more: Alibaba continues plans for value unlock as it seeks spinoff of logistics unit
The company’s decision to backtrack on spinoff plans meant to unlock more value for the various domains within its sprawling business appeared to overshadow Alibaba’s fiscal second-quarter results, which showed better-than-expected profit as well as revenue that matched what analysts were anticipating.
Shares were down 7% in premarket trading Thursday.
The company generated fiscal second-quarter net income of RMB27.7 billion ($3.8 billion), or RMB10.77 per American depositary share, whereas Alibaba posted a net loss of RMB20.6 billion, or RMB7.77 per ADS, in the year-prior period.
On an adjusted basis, Alibaba recorded earnings per share of RMB15.63, while analysts tracked by FactSet were modeling RMB15.28.
Revenue rose to RMB224.8 billion from RMB207.2 billion, while the FactSet consensus was for RMB224.5 billion.
The company raked in RMB97.7 billion in total revenue from its Taobao and Tmall e-commerce platforms, up 4% from a year before.
Alibaba’s cloud-intelligence group saw a 2% bump in revenue to RMB27.6 billion.
New U.S. export control restrictions on semiconductor technology “may materially and adversely affect Cloud Intelligence Group’s ability to offer products and services and to perform under existing contracts, thereby negatively affecting our results of operations and financial condition,” the company said in its release.
Alibaba also noted that its board of directors has approved an annual cash dividend for fiscal 2023 of $1 per ADS, payable in U.S. dollars to shareholders as of the close of trading on Dec. 21.
“Going forward, we will continue to review and determine the dividend amount based on factors such as business fundamentals, capital requirements, among others, on an annual basis,” Alibaba said in the release.
The company will shell out about $2.5 billion for the dividend distribution.
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