SoftBank Group Corp’s shares rose on Wednesday after Alibaba Group announced a major restructuring plan. SoftBank has a 13.7% stake in Alibaba.
Reuters reported that SoftBank’s shares increased by 5.6% in the afternoon trade, the biggest gain in five months. Meanwhile, Alibaba’s shares went up by 13.2%.
AMBusiness reported on Tuesday that Alibaba plans to split into six units and considers fundraising or holding initial public offerings.
The new development is seen as the largest restructuring of the technology conglomerate in its 24-year history.
SBI Securities analyst Shinji Moriyuki said “the split-up would probably prevent Chinese government scrutiny of any of Alibaba’s operations from affecting the rest of the group.”
China’s regulatory crackdown on major domestic companies in the internet, private education, and property sectors over the past few years has caused a significant drop in market values and impacted investor confidence.
“Investors took heart from sense of uncertainty over Alibaba having been eased a little … there was a certain discount to SoftBank’s stake given the unclear direction of China’s internet sector,” Moriyuki said.
According to Mitsushige Akino, a director at Ichiyoshi Asset Management, investors bought more SoftBank shares due to a rise in Alibaba’s shares. However, it is still unclear if the restructuring plan will result in sustainable growth for Alibaba.
In his words, “I’m not sure if a 5% rise (in SoftBank shares) can be justified. I believe buy orders, including short covering, are being placed in response to this new factor to trade on. We just have to wait and see how this really plays out.”
