Investing.com -- Shares of Alibaba Group (HK:9988) (NYSE:BABA) slumped in Hong Kong trade on Monday after the e-commerce giant said that outgoing chief executive Daniel Zhang will also step down as the head of its cloud unit.
Eddie Yongming Wu will take over as acting chairman and CEO of the cloud unit, and will also take over as CEO of the firm, effective immediately, Alibaba said in a statement released on the Hong Kong Stock Exchange.
Shares of the firm slumped over 3% after the announcement, dragging the broader Hang Seng index down 2%. The move was largely unexpected by markets, given that Zhang was set to lead Alibaba’s cloud unit as the company embarks on a six-way split in the coming months.
The firm said on Monday that it will continue as planned with spinning off the cloud unit with its own separate management team. The e-commerce giant had also flagged a potential listing for the unit.
Alibaba had announced earlier this year that Zhang would step down as CEO of the firm, as part of a plan to split its core businesses into six separate entities. Zhang was originally intended to lead the cloud unit after the split, which is also set to seek a separate listing.
Zhang joined Alibaba in 2007 and played a key role in the company’s wildly successful “Singles Day” shopping event. He was appointed as CEO in 2015, and took chairmanship in 2019, succeeding co-founder Jack Ma in both roles.
A Reuters report, citing an internal letter, said that Zhang will still work with Alibaba and that the firm will invest $1 billion in a technology fund established by Zhang.
Commenting on the news, Morgan Stanley (NYSE:MS) analysts said Zhang's departure is surprising.
"We think [this] will bring uncertainty in the execution time line of the cloud spin-off, as part of Group's restructuring plan... We think the market will take Mr Zhang's departure from the cloud unit negatively, given the change in management will likely lead to uncertainty or a potential delay in the spin-off time line," they said in a client note.
"Mr Wu, for perspective, has a strong technology background as he had previously served in the CTO role at key business units including Taobao and Alipay."
Alibaba’s six-way split was largely seen as a means to appease Chinese regulators, who had harried the company over the past three years with a string of anti-trust fines and investigations.
But the regulatory climate in China now appears to be improving, especially as the country taps into its biggest internet companies to help stimulate a slowing economic recovery.
Additional reporting by Senad Karaahmetovic