In early Hong Kong trading on Friday, Alibaba’s shares fell nearly 10%. The day before, the Chinese e-commerce behemoth had announced that it would not move through with the full spinoff of its cloud group because of restrictions on the export of chips from the United States.
Alibaba’s U.S.-listed shares ended the week more than 9% lower, having dropped more than 10% since the year’s beginning.
Alibaba’s Hong Kong-listed stock has dropped nearly 15% so far this year, outpacing the 11.2% decline in the Hang Seng index as a whole.
Alibaba announced on Thursday that it would no longer be moving forward with a spinoff of its Cloud Intelligence Group, which is Alibaba’s cloud computing division and a rival to Microsoft Azure and Amazon Web Services. Alibaba intended to make the division publicly listed.
Restrictions on U.S. chip exports, according to Alibaba, have made it more difficult for Chinese companies to obtain vital chip supplies from American businesses. October saw the U.S. ban sales of Nvidia’s cutting-edge chips, the H800 and A800, which are aimed at artificial intelligence.
Alibaba said on Thursday that the limitations have “created uncertainties for Cloud Intelligence Group’s prospects.”
“We think that a complete spin-off of Cloud Intelligence Group might not accomplish the desired impact of increasing shareholder value,” the company stated, indicating that it would instead concentrate on creating a long-term growth strategy for the division “under the changing conditions.”
Alibaba disclosed in a regulatory filing ahead of its earnings announcement on Thursday that founder Jack Ma’s family trust intended to sell down its ownership of the company, selling 10 million shares for a cash price of $870.7 million.
One of the most significant organizational restructurings in Alibaba’s history, the company’s plan to split up into six distinct business units has encountered a roadblock with the decision to rescind its cloud unit spinout.
Prior to this, Alibaba had declared that it would postpone plans to list its Freshippo grocery retail chain on the stock exchange “while we assess market conditions and other factors.”
The business still plans to list its smart logistics division in Hong Kong under the name Cainiao.