Why Alibaba should spin off Lazada

With additional analysis by Simon Huang and reporting by Tay Tian Wen

A day before Alibaba released its latest earnings on February 24, a Bloomberg report suggested that the Chinese ecommerce giant had to shelve talks with investors to raise US$1 billion in a pre-IPO round for Lazada. The report cited a disagreement over the Southeast Asian firm’s valuation.

The potential spinoff of Lazada from Alibaba shouldn’t come as a surprise.

There have been some indications that Alibaba wants to empower its “mini-CEOs” to cope with rising competition, according to the Wall Street Journal. The paper notes that Alibaba’s overseas ecommerce platforms – Lazada and Trendyol – could be among the units that are “ripe for spinoffs in the future.”

For its December 2021 quarter, Alibaba posted its slowest revenue growth since going public in 2014. Its stock price has been reeling from the ongoing tech crackdown in China.

Lazada, despite being overtaken by Shopee in Southeast Asia, might hold the key to unlocking the Chinese group’s future growth prospects – but only if it can stand alone.

Higher expectations for Lazada?

Lazada is celebrating its 10th anniversary this month, and half of those 10 years have been under Alibaba. The story of how Lazada has been surpassed by Shopee in Southeast Asia has been well-covered.

Following the 2016 acquisition, culture conflicts and frequent top executive changes contributed to Lazada’s slowed momentum. But efforts have been made to correct that.

In late 2021, Alibaba appointed Jiang Fan to lead its new international digital commerce division that includes Lazada, Alibaba.com, and AliExpress. He was previously in charge of the Taobao and Tmall divisions, two of Alibaba’s most successful ventures.

A potential boost to valuation

But uncertainties abound