While Alibaba announced it would split its company as a move “designed to unlock shareholder value and foster market competitiveness,” ” Fast Money ” traders aren’t so sure about buying the stock. The Chinese tech giant announced Tuesday it would divide its company into six business groups. Each new unit, with the exception of online shopping platform Taobao, has the ability to pursue independent fundraising and a public listing when they are ready, said Alibaba CEO Daniel Zhang. The spinoff decision comes after a roughly $600 billion wipeout from Alibaba’s peak share price in October 2020. The losses came after the Chinese government’s crackdown on domestic tech giants. Alibaba shares jumped more than 14% following the announcement. BABA 1D mountain Alibaba stock However, a couple of the “Fast Money” traders are hesitant as to whether the stock is now a good play. “There’s always been a lot of value here. In fact, you get Ant for free when you invest in this company. This is great news to me. This is a wait-and-see moment,” said Tim Seymour, founder and chief investment officer of Seymour Asset Management. Ant Group is a fintech affiliate of Alibaba, and it was forced to cancel its initial public offering in November 2020. Nevertheless, Seymour said he finds it “hard to believe” whether the spinoff comes with good intentions from the Chinese government. “When China talks about unlocking value, it’s really hard to believe them … And it’s with some irony, some coincidence that Jack Ma returned from his ‘Weekend at Bernie’s,'” Seymour added, referring to Alibaba’s founder who was recently spotted in China . “If anything, Tencent to me is more interesting.” Metropolitan Capital Advisors’ CEO Karen Finerman said that she will also be sitting on the sidelines on the stock. She said that while sentiments with Chinese tech companies could potentially have bottomed out, she is unsure how the split will be executed. “How do they actually do it? Do they split them all up at one time? Do they do it individually? I don’t know,” Finerman said. “And how do they decide? … All that having been said, [I] can’t own it.” Meanwhile, Jim Osman, founder of The Edge, said that the group’s message that the spinoff will create shareholder value “is a very real proposition.” “On the face of it, I’m happy about the value creation. I think it gives a catalyst for other Big Tech, like Meta and Amazon, to split up. I think that’s very important,” he said. Osman also noted that spinoffs make companies appear cheap and offer an attractive entry point. “It’s a fundamentally inefficient method of distributing stock to the wrong people, and with that inefficiency comes opportunity,” he said.
