Alibaba to Switch Planned IPO from Hong Kong to US
Alibaba Group Holding, China’s most valuable electronic commerce (e-commerce) company, has scrapped plans for a US$60bn-plus initial public offering (IPO) on the Hong Kong Stock Exchange (HKSE) and will instead hold its share sale in the US, according to reports.
They suggest that the HKSE turned down the company’s demands to control the composition of its board. Alibaba’s founder, Jack Ma, and other senior executives, who own just over 10% of the company, had attempted to persuade Hong Kong authorities that leading executives should be allowed to nominate a majority of board directors. The company had been planning for months to sell shares in Hong Kong, but ended talks with the exchange and the Listing Committee this week.
Charles Li, the exchange’s chief executive (CEO) responded that Alibaba’s requests went beyond what Hong Kong could grant without significantly changing its rules and that public interest took precedence over shareholder interest in the exchange’s charter.
The reports predict that a US IPO could value Alibaba at more than US$60bn based on analyst estimates, making it the biggest in the technology sector since Facebook’s IPO last year and would test global investor appetite for China’s expanding consumer market. It would also exceed Twitter’s planned IPO. Alibaba is now expected to appoint US banks – with Credit Suisse and Morgan Stanley tipped to be chosen – to proceed with a New York listing.
At US technology companies, such as Google, founders have kept control of their businesses following IPOs through dual-class shares that give more voting rights to certain owners. According to reports, Alibaba will not adopt a dual-class structure in the US, but retain its internal partnership of senior executives that is designed to control the group’s strategic direction and culture. Hong Kong listing rules explicitly ban dual-class shares
In a letter to Alibaba employees earlier this month, Ma outlined why the company’s partners, including himself, needed to have the power to determine the company’s future while keeping its long-term vision intact.
“We believe that only a group of people who are passionate about the company and are mission-driven will be able to protect the company from external pressure from competition and temptation to seek short-term gains,” he said.
While a New York listing will likely allow Mr. Ma and other senior executives to maintain control over board nominations, reports note that Alibaba will also face a more litigious environment in the US compared to Hong Kong, where class actions are a rarity.