Why Alibaba Stock Slumped by Almost 3% Today
What happened
Monster Chinese tech company Alibaba Group (NYSE: BABA) is shifting a business unit, and investors aren't necessarily happy about it. On news of the apparently looming move, the market punished Alibaba by sending its U.S.-listed shares down by almost 3% in price on Wednesday. That was a steeper decline than the 0.8% posted by the S&P 500 index.
So what
Very early that morning, Reuters reported that Alibaba plans to separate its DingTalk office communication platform from the company's cloud division. This was according to two sources close to the company, who said that DingTalk would become a fully owned Alibaba subsidiary instead of operating under the umbrella of the cloud intelligence business group. Its services would not be impacted by the move, they added.
DingTalk is an online platform somewhat reminiscent of the highly popular Slack, currently owned and operated by U.S. customer relationship management (CRM) specialist Salesforce.
Alibaba has ambitions to launch an initial public offering (IPO) of the cloud intelligence business group by next May. If and when that occurs, it will likely be the first of Alibaba's recently created six major business divisions to do so.
It's possible that investors are concerned there might be some difficulty behind the scenes with DingTalk. It can be disquieting to hear of a notable asset within a company being jostled around in such a manner without sufficient official explanation.
Now what
Many investor eyes are on the cloud division these days. Alibaba's fiscal first quarter results, published last week, revealed that the unit's revenue growth was the weakest out of its divisions, at 4%.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Salesforce. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
