Alibaba Group Holding Ltd. is bringing back two of Jack Ma’s longest-serving lieutenants to try and turn around a company that’s struggled to regain its footing since Beijing’s regulatory assault against the internet sector in 2021. Yet investors remain uncertain what they can do to restore an icon of Chinese private enterprise to its former glory.

Alibaba surprised markets by declaring Eddie Wu and Joseph Tsai will replace eight-year veteran CEO Daniel Zhang at the helm. Both men are business heavyweights of their generation, credited with steering the technology and strategy that underpinned China’s erstwhile most valuable corporation — before Xi Jinping’s tech crackdown obliterated growth across swaths of the industry and nixed once-aggressive expansion plans.

Their task now is to figure out how to follow through on a landmark six-way restructuring and spinoff that Zhang unfurled just months before. The idea was to create a family of leaders in businesses from cloud computing and logistics to international commerce that could seek funding and list separately, appeasing shareholders hungry for value.

Yale alumnus Tsai, a deal-maker well-liked among investors, is likely to play a significant role in handling markets and Alibaba’s most prominent backers. A former lacrosse athlete arguably best-known in America as the owner of the Brooklyn Nets, Tsai understands the business intimately: he was right beside Ma at Alibaba’s inception in a Hangzhou lakeside apartment in 1999.

Read more: Alibaba Names Tsai Chairman, Wu CEO in Surprise Shake-Up

Wu, who was similarly with Ma from the very beginning, is a lesser-known quantity. The former computer science major is credited with helping develop the company’s ad platform and the PayPal-like Alipay, now part of the Ma-backed Ant Group Co. He went on to establish a venture capital firm that manages about a 10 billion yuan ($1.4 billion) portfolio encompassing autonomous driving and software.

“Alibaba is basically a China proxy so it is dragged down by geopolitics and China’s economy. In addition it is facing stiff competition from other e-commerce platforms as well as short-videos,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “Until the company can deliver growth again, I think investors won’t give much credit to just a management change.”

Alibaba shares closed down 1.5% during a volatile session in Hong Kong, and slid more than 2% in pre-market trading in New York. They swung between positive and negative territory on a day the Hang Seng Tech Index headed south from the outset.

It’s unclear what tempted the pair back into the fold, though they inherit a company that’s a shadow of its former self.

In 2020, regulators cracked down on Ma and Ant Group Co. after the billionaire angered regulators with a public critique of Chinese financial regulators. Beijing began a clampdown on the private tech sphere shortly after, accusing Alibaba of monopolistic behavior before levying a record fine for the alleged violations. Alibaba shares have slumped about 70% since, a wipeout of more than half a trillion dollars of value.

The company never regained its stratospheric growth, particularly as new entrants such as ByteDance Ltd. and PDD Holdings Inc. sapped its core business. It began to lose market share in the cloud, its other engine of growth, to state-backed rivals.

Zhang, who remains head of the cloud business, outlined the restructuring in detail just as Alibaba posted its third consecutive quarter of single-digit revenue growth, reinforcing concerns that a Chinese consumer spending rebound may be farther out than anticipated.

At the same time, long-time rival Baidu Inc. — once dismissed by investors as having missed the mobile revolution — introduced China’s first ChatGPT-like AI service Ernie to positive reviews, highlighting how Alibaba and its peers may be falling behind in next-generation technology.

Wu, a technologist by training, will spearhead Alibaba’s future efforts in innovation, the company said in a statement on Tuesday.

“The good thing is that the new CEO and chairman are all co-founders of the company and are the closest to Jack Ma. That means Ma remains the spiritual leader of Alibaba,” said Kenny Wen, head of investment strategy at KGI Asia Ltd.

Beyond technology, much of the market has fixated on the imminent restructuring, and its potential to unleash a half-dozen publicly traded companies, starting with more mature units like the cloud and logistics.

With the overhaul, Alibaba has said it wants to operate as a true investment holding company. Bringing onboard two veteran investors to run the show could further that goal.

It remains to be seen whether Tsai and Wu will make tweaks to the original restructuring blueprint. Tsai, for one, has never shied away from making bold moves, whether it was quiting a $700,000-a-year job to bet on Ma, or crafting the controversial Alibaba partnership structure that ensured board directors are chosen by a core group of original founders and veteran employees.

Decentralizing the company’s business lines and decision-making power addresses one of Beijing’s primary goals during its sweeping crackdown. Their appointments could hint at a desire to make progress in the restructuring, moving the company a step forward toward individual IPOs, said Steven Leung, an executive director at UOB-Kay Hian Holdings Ltd.

What Bloomberg Intelligence Says

The redeployment of current CEO Daniel Zhang, a well-known figure among investors, to the highly dynamic cloud business could offer some assurance to Alibaba shareholders as they await their share of this unit via stock dividends.

- Catherine Lim and Trini Tan, analysts

Click here for the research.

Zhang, as head of the cloud division, is tasked with taking Alibaba into the as-yet amorphous realm of AI.

In Baidu’s wake, Alibaba unfurled its own large language model dubbed Tongyi Qianwen. That might be key to ensuring the company name endures 102 years, as co-founder Ma once famously and repeatedly declared was his over-arching ambition.

“I’ll step onto a new stage with our colleagues in cloud, exploring how to use new technologies like cloud computing, big data and AI to serve thousands of industries,” Zhang said in an internal memo viewed by Bloomberg News.

--With assistance from Lulu Yilun Chen.

Author: Jane Zhang, Abhishek Vishnoi, Jeanny Yu and Zheping Huang