BEIJING, February 8 (TMTPost)--  Alibaba Group Holding Ltd.’s management ruled out separate listings of two units in the near term as they are very unlikely to achieve desirable valuation under challenging market conditions.

Credit：Visual China

“Market conditions currently are just not in a state where we believe we can really truly reflect the value in true intrinsic value of these businesses,” Alibaba Chairman Joseph Tsai replied to a request for updates of potential initial public offerings (IPOs) of the grocery unit Freshippo, or Hema, and the logistics arm Cainiao Smart Logistics Network Limited at an earnings conference on Wednesday. Last year, when Alibaba unveiled its overhaul, part of the goal was to make sure the steps it would take shall reflect the intrinsic value of its various business units, and there are multiple ways it could adopt, out of which it specifically talked about spinoff and fundraising of units like Freshippo and Cainiao, Tsai told analysts. He stressed the caveat upon the announcement was that all these transactions were subject to market conditions.

Right now, focusing on generating synergies among units of the group will be the best way to reflect their value, concluded by Alibaba CEO Eddie Wu and his team following a review of core business in the past few months, according to Tsai. He added that in several areas, Alibaba has formed special project teams to ensure synergy and creation, and it believes prioritizing synergies to strengthen its core business is the best value maximizing path to date. Tsai said Alibaba continues to explore value creation through separate financing of units, but “given the challenging market conditions, as I said, we’re not in a hurry on the timing of these transactions.”   

Tsai’s remark came as news about possible separate Hong Kong IPO of any subsidiaries swirled following Alibaba’s biggest restructure in its 24-year history. The Chinese internet titan announced late March 2023 that it decided to split into six business groups, including Taobao Tmall Group, Alibaba International Digital Commerce Group, Local Services Group, Cainiao, Cloud Intelligence Group, Digital Media and Entertainment Group. Five of these major business groups have the flexibility to raise external capital and potentially to seek its own IPO, with the exception of Taobao & Tmall Group, which remains wholly-owned by Alibaba Group. Each business group is fully responsible for its performance, with financial independence.

Almost two months later, Alibaba said listing plans about Freshippo and Cainiao got the nod from its board of directors. Freshippo was approved to execute an IPO, and expected to be completed in the next 6 to 12 months. Cainiao was allowed to explore an IPO with the target to complete the deal in the next 12 to 18 months. The board also approved a full spin-off of the Cloud Intelligence Group via a stock dividend distribution to shareholders, aiming to complete the breakup in the next 12 months and make the group an independent publicly listed firm.

Freshippo could apply for spinoff  with the Hong Kong Stock Exchange (HKEX)in July and launch an IPO as early as November if the application approved, Hong Kong Economic Times reported late June. However, a Bloomberg report in September said Alibaba is putting Freshippo listing on hold as it concluded it could achieve a valuation of about US$4 billion, which is lower than its target range of US$6 billion to US$10 billion when it considered raising a private funding round in 2022.  Alibaba later that month disclosed it has submitted a spinoff plan to HKEX and there is no assurance that the spinoff will take place.

A prospectus released late September showed Cainiao has applied for IPO in Hong Kong, with Citigroup Inc, Citic Securities Co., Ltd and JPMorgan Chase & Co as joint sponsors. Cainiao, a company that Alibaba holds a 69.54% stakes in, thus became the unit that is most likely to become the one that goes public. While Cainiao’s filling didn’t provide detailes of the offering terms, Bloomberg cited sources late September that its first share sale could raise at least US$1 billion.