Alibaba: Chair and CEO Succession Plan Is Positive for Corporate Governance

Alibaba Group’s BABA leadership plan, which includes the segregation of the chair and CEO roles alongside the appointment of Eddie Wu, the chair of Taobao and Tmall Group, to succeed Daniel Zhang as Alibaba Group CEO, should enhance corporate governance. Zhang, who will remain CEO and chair at Alibaba Cloud Intelligence Group, will be able to focus on reaccelerating its slowing cloud revenue and preparing its IPO. We think these shifts will enhance Alibaba Cloud Intelligence Group’s independence from Alibaba Group. Overall, the leadership changes don’t have an impact on our fair value estimates.

The planned spinoff of Alibaba Cloud Intelligence via a distribution to shareholders as stock dividends is expected to be completed in the next 12 months. We think it is appropriate for Zhang to focus on the cloud business to reaccelerate cloud revenue growth, capture the opportunities with generative artificial intelligence and prepare for its IPO. We also think this arrangement will lead to higher independence of Alibaba Cloud Intelligence from Alibaba Group. In our view, this increases the probability of Alibaba Cloud Intelligence Group winning business from companies that compete with any of the businesses at Alibaba Group. Customers are more likely to believe that Alibaba Cloud Intelligence Group will not share customer data with Alibaba Group. At this stage, we are not certain if Zhang will leave the Alibaba Partnership to further increase Alibaba Cloud Intelligence Group’s independence from Alibaba Group. We would also like to see the separation of the CEO and chair roles at Alibaba Cloud Intelligence Group to further improve corporate governance.