Alibaba Group is planning an initial public offering in the U.S.,
rather than Hong Kong, after the operator of the world's largest
e-commerce marketplace disagreed with the Hong Kong Stock Exchange over
how the business will be run, according to a person familiar with the
situation.
Alibaba, part owned by Yahoo, has been working on an
IPO in Hong Kong for many months but the company has proposed a
partnership structure of 28 founders and executives who will run the
business when it is public.
That approach bumped up against
corporate governance rules of the Hong Kong Stock Exchange, which aim to
give investors control over companies based on how many shares they own
and limit so-called dual share-class structures.
Talks between
Alibaba and the Hong Kong Stock Exchange have broken off and the company
has hired attorneys to help it pursue an IPO in the U.S., the person
said, on condition of anonymity. The person did not want to be
identified because Alibaba's plans are not public.
Alibaba's IPO
may rival Facebook's in size and importance, valuing the Chinese
e-commerce company at more than $100 billion. An IPO in the U.S. would
be an important win for U.S. exchanges, bankers and lawyers involved in
the process — although for most large investors where the company is
listed makes little difference.
Alibaba's goal is to bring its
partnership approach to corporate governance to the U.S., hoping to
raise money from outside investors while giving founders and executives
enough control to run the business for the long-term.
"It's all
about accountability and the ability of public stockholders to have a
say versus the founders not wanting to cede control," said Tom Murphy, a
securities and capital markets partner at law firm McDermott, Will
& Emery. "How much is about long-term projects as opposed to just
wanting to know you can stay in charge probably depends on who you ask."
Facebook
and Google, two of the most successful technology companies in the
U.S., have dual, or multiple share-class structures that give founders
and management more voting power than other shareholders.
Alibaba
is not planning to use a dual share-class structure, however in U.S.
capital markets the company could provide similar control for founders
and executives through its partnership model, according to Murphy.
"In
the U.S. they can also have the 28 people agree to vote their stock
together which also makes it even easier for that group to maintain
control at a lower level of stock ownership," Murphy explained.
Charles Li, head of the Hong Kong Stock Exchange, weighed in on the debate in a blog Wednesday.
"We
need to look objectively at the issues and not be swayed by emotional
arguments or be distracted by specific circumstances of any given
company or issue," Li wrote. "In the end, we should take responsibility
for doing what is right and best for Hong Kong, not just what is safe
and easy."
While the Hong Kong Stock Exchange would benefit
financially from an Alibaba listing in Hong Kong, Li said the "public
interest" is a more important consideration.
Published on: USAtoday
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