Alibaba, the Chinese tech giant, recently announced plans to restructure its business into six separate parts, a move that investors have welcomed as a means of unlocking value for the company. Over the past two years, Alibaba’s stock has been hit by a wave of regulatory pressures, causing its value to decline significantly.

The restructuring plan, announced Tuesday, saw Alibaba’s shares surge by 14.3%, marking the stock’s best day in nine months. The reorganisation opens the door for Alibaba’s six parties to raise capital or go public, providing new clarity on the previously hidden subsidiaries within the multibillion-dollar company’s conglomerate structure.

The restructuring is expected to transform how analysts and investors view Alibaba stock, with investors likely to start valuing the stock as the sum of the parts (SOTP) instead of using a valuation framework like forward price-to-earnings (P/E). This would allow investors to price in elements of Alibaba’s business that might otherwise get overlooked when analysing the company as a sweeping tech conglomerate.

Aside from changing the calculus on valuation, the restructuring is also expected to make Alibaba more agile, reducing potential regulatory risks and unlocking trapped values at the conglomerate level. Moreover, it could inspire other tech companies worldwide to follow suit.

The move also sends a signal to Chinese regulators, whose almost three-year crackdown on the tech sector has been the driving force behind Alibaba’s steep decline. Alibaba clarified that the split was an effort to increase competition, which could be seen as an attempt to please Chinese bureaucrats.

This is not the first time Alibaba has radically reorganised its business. Its previous restructuring led to a clash with regulators, the cancellation of what would have been the world’s biggest initial public offering, and a crackdown by Beijing on Big Tech.

The reorganisation is being led by Alibaba’s CEO, Daniel Zhang, who aims to simplify the organisation and make it more agile. As part of the restructuring, Alibaba will divide its operations into six separate business groups focusing on various areas, including domestic and international e-commerce, cloud computing, local services, digital media, and logistics. However, Alibaba will retain complete ownership of its Chinese e-commerce unit, encompassing popular online shopping sites Tmall and Taobao.

In a recent conference call, Alibaba’s CFO, Toby Xu, announced that the company would evaluate the strategic importance of their separate business units that will eventually go public and decide whether to retain control. The restructuring will allow each business unit to pursue independent fundraising and IPOs when ready. Alibaba will determine whether to keep strategic management of each unit after they go public. Additionally, the company plans to monetise non-strategic assets in their portfolio to optimise its capital structure.

Despite the positive outlook on the restructuring plan, some Alibaba employees are worried about potential job cuts, particularly at unprofitable business units kept afloat by the cash-spouting online sales platforms. However, many analysts believe that the restructuring should improve operations by allowing more focus and lead to higher valuations by making it easier for investors to assess the worth of individual business units.