Alibaba’s Jack Ma Steps Down as CEO Before Possible IPO

Alibaba Group Holdings Ltd.’s billionaire founder Jack Ma will step down as chief executive officer, stoking speculation that China’s largest e-commerce company is preparing for an initial public offering.

Ma, 48, will remain chairman, he said in a letter to employees yesterday. He will end his tenure as CEO on May 10, when a replacement will probably be named. The former English teacher, who has led Alibaba since its formation in 1999, has a net worth of $3.4 billion, according to the Bloomberg Billionaires Index.

The move may signal that Alibaba is finalizing plans for a share sale following a management restructuring announced earlier this month and the June delisting of a Hong Kong unit. Alibaba last year also bought back a stake from Yahoo! Inc. in a deal valuing the Hangzhou, China-based company at $35 billion.

“A series of changes at Alibaba Group may suggest that an IPO is imminent,” said Wendy Huang, a CIMB Securities Ltd. analyst in Hong Kong. Ma’s role “will not change too much” because he already is focused on long-term strategy, she said.

Ma and 17 others founded Alibaba as an online marketplace for Chinese companies. The business grew as economic liberalization spurred a boom in manufacturing and trade. It has expanded its workforce to more than 24,000 and added services including cloud computing, online payment and consumer auctions.

Alibaba’s Taobao consumer marketplace, a cross between Inc. and EBay Inc., has more than 500 million registered users and is one of the 20 most-visited websites in the world, according to the company. Its Tmall business-to-consumer website sold $3.1 billion of goods in one day during a Nov. 11 promotion.

Profit Triples

The company’s profit more than tripled to $781.7 million in the nine months ended June 30, according to Yahoo’s financial report for the quarter ended Sept. 30. Sales jumped 74 percent to $2.9 billion.

Ma will probably remain heavily involved at Alibaba “given the new plan looming on the horizon, which is the mother of all IPOs,” said Duncan Clark, the Beijing-based chairman of BDA China, which advises technology companies. “He will always have a larger-than-life influence on the company no matter what title he holds.”

Younger Leaders

Ma said his new role reflected a wider push to hand over management to people born in the 1970s or 1980s as founders born in the 1960s stepped down.

“I want to encourage our young leaders to step forward to ensure a smooth transition,” he said. “The next generation of Alibaba people are better equipped to manage an Internet ecosystem like ours.”

Ma said in June the company could sell shares in an IPO within five years. The out-going CEO may participate more in venture-capital funds focusing on mainland China in future, said Dundas Deng, the CEO of Midas Investments Ltd.

China had 564 million Internet users at the end of 2012, up 10 percent from the year before, according to the government-run China Internet Network Information Center. China has more Web users than the total population of any other country except India.

The country also has more online shoppers than the U.S., and the value of its online retail sales may triple to $360 billion by 2015, Boston Consulting Group predicted last year.

In December, Taobao was also removed from the U.S. government’s “Notorious Markets” piracy list after significantly decreasing the sale of infringing products, the Office of the U.S. Trade Representative said.

Internal Successor

Alibaba will probably pick a current employee to replace Ma, with possible candidates including Peng Lei, the head of Alipay, and Chief Strategy Officer Zeng Ming, said Midas Investments’ Deng. Jonathan Lu, the head of Alibaba’s data business, could also be in the running, said Eric Qiu, an analyst at Guosen Securities Co. in Hong Kong. The company appointed nine senior managers earlier this month as part of a restructuring that divided the group into 25 units.

“Succeeding a founder CEO is a difficult job, especially taking over from a CEO with such a distinct personality who is very ‘ET’-like; this requires great courage and the willingness to make sacrifices,” Ma said in his letter, referring to the movie character. “This is something I’ve considered for more than a year.”

“Jack Ma’s letter to employees speaks for itself,” said John Spelich, a spokesman for Alibaba based in Hong Kong.

Yahoo Stake

Alibaba agreed in May to buy back about half of Yahoo’s 40 percent stake for about $7.1 billion. Yahoo acquired the shares in 2005 in exchange for $1 billion and ownership of Yahoo’s Chinese operations.

Alibaba also delisted its Hong Kong unit last year after paying HK$18.3 billion ($2.4 billion) to buy back the 27 percent stake held by minority investors.

Ma spends his free time dabbling in poker and traditional medicine rather than surfing the Internet. He also travels with a personal tai chi trainer and has teamed with movie star Jet Li to spread awareness of the Chinese martial art. In 2010, he joined the global board of the Nature Conservancy, an environmental group.

“I believe that doing what makes oneself happy, staying within one’s own limits and being a good partner to one’s more capable colleagues, is the right thing for me to do,” Ma said in his letter. “If not now, when? If not me, who?”

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