Alibaba Group (HK:9988) (NYSE:BABA) witnessed a decline in its stock price during Hong Kong trading on Monday following the surprising announcement of the resignation of Chief Executive Officer (CEO) Daniel Zhang from both his role as CEO and the head of the cloud unit.
In a statement released on the Hong Kong Stock Exchange, Alibaba disclosed that Eddie Yongming Wu would immediately take the helm as the acting chairman and CEO of the cloud unit, and concurrently assume the position of CEO for the entire firm.
The unexpected news sent shockwaves through the market, resulting in a more than 3% drop in Alibaba’s share price. This decline had a domino effect on the broader Hang Seng index, causing it to plummet by 2%. This abrupt leadership change caught many off guard, especially considering Zhang’s pivotal role in steering Alibaba’s cloud unit through an imminent six-way split.
Despite this leadership reshuffle, Alibaba reaffirmed its commitment to proceeding as planned with the spin-off of the cloud unit, which will operate under its independent management team. The e-commerce giant had previously hinted at the possibility of a separate listing for this unit.
The decision for Zhang to step down as CEO had been announced earlier this year as part of Alibaba’s strategy to divide its core businesses into six distinct entities. Initially, Zhang was expected to continue leading the cloud unit post-split, which was also slated for a separate listing.
Zhang, who joined Alibaba in 2007, played a pivotal role in orchestrating the highly successful “Singles Day” shopping event. He was appointed as CEO in 2015 and assumed the role of chairman in 2019, succeeding co-founder Jack Ma in both capacities.
In an internal communication cited by Reuters, it was revealed that Zhang would still maintain ties with Alibaba, with the company earmarking a $1 billion investment in a technology fund established by him.
Alibaba’s decision to undergo a six-way split was largely viewed as a response to appease Chinese regulators who had subjected the company to a series of antitrust fines and investigations over the past three years. However, the regulatory climate in China now seems to be evolving, particularly as the country engages its largest internet companies in efforts to stimulate a sluggish economic recovery.
