Alibaba Stock Slides as Ex-CEO Abruptly Quits Cloud Unit Ahead of IPO

Alibaba's stock took a hit in Hong Kong, dropping over 4%, after former CEO Daniel Zhang unexpectedly resigned from the company's cloud computing unit.

Credits: REUTERS

Zhang's departure raises concerns about the unit's spin-off plan and potential discord within the company. Eddie Wu, the new CEO, will take over as acting CEO and chairman of the struggling cloud unit, which is facing weak sales growth ahead of its planned IPO next year.

Analysts have mixed thoughts on the news, with Morningstar analyst Chelsey Tam stating, "We think this latest change was not planned back in June and there are concerns of disagreements among Alibaba's partners." Zhang had previously announced in June that he would focus solely on the cloud unit, which is valued at $41 billion to $60 billion and is one of five units being spun off as part of Alibaba's restructuring.

Despite Zhang's departure, Alibaba has confirmed that it will continue with its plan to spin off the cloud unit under a new management team. However, Citi analyst Alicia Yap warns that Zhang's exit could impact Alibaba's stock until a successor is named, potentially affecting the timing and process of the spin-off.

The cloud unit, which includes DingTalk and the generative AI model Tongyi Qianwen, is Alibaba's second-largest revenue source after domestic e-commerce. It experienced a decline in revenue in the first quarter of this year due to delayed projects and other factors. Nevertheless, it remains China's largest cloud provider with a 34% market share.

Zhang's decision to leave the cloud unit was announced in a staff letter, where he also revealed plans to set up a technology fund. Eddie Wu, one of Alibaba's co-founders, will now lead the cloud unit as acting CEO. Analysts believe that Wu's appointment could bring fresh energy to the business and mark a turnaround for Alibaba, which has faced intense regulatory scrutiny in recent years.

Alibaba's share price fell to its lowest level since August 23, reaching HK$86.85 ($11.08). Investors will be closely watching for updates on the cloud unit's spin-off and the appointment of a new CEO.

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• Alibaba's stock drops over 4% after ex-CEO Daniel Zhang quits the cloud unit.

• Concerns arise over the unit's spin-off plan and potential discord within the company.

• New CEO Eddie Wu takes over as acting CEO and chairman of the struggling cloud unit.

Source: REUTERS