A tale of two internet leaders: Tencent vs Alibaba
Jack Ma Yun, the founder of Alibaba Group, had expressed several times his preference for Hong Kong as the listing venue of his company. But the mainland e-commerce titan announced over the weekend that it had dropped Hong Kong for Wall Street as the site of an initial public offering that may value the firm at up to US$120 billion.
Alibaba dumped Hong Kong because the New York Stock Exchange and Nasdaq allowed a corporate structure that gives top executives the right to nominate a majority of the company's board members even if their holdings are not substantial, whereas Hong Kong did not allow such a dual-share structure.
Jack Ma owns less than 8 per cent of Alibaba, while Softbank has a 36.7 per cent stake and Yahoo controls 24 per cent.
Tencent, on the other hand, is led by Pony Ma Huateng, who holds a 10.2 per cent stake. The company was listed in Hong Kong in 2004 at an offer price of HK$3.70. The majority shareholder is Naspers, a South Africa-based media company with a 33.8 per cent stake.
Jack and Pony are not related.
But why does Pony Ma care little about the listing structure, while Jack Ma sees it as a deal breaker?
Liu Xingliang, chairman of Hongmai Software, a Beijing-based internet data analysis firm, said the key difference lay in the majority shareholders at the two firms. "Naspers focuses on media and doesn't know very much about the internet. It gives the management of Tencent lots of trust and freedom," he said.
Softbank and Yahoo, however, had abundant internet experience and were confident they "know" the business, he said. "When a person thinks he knows, he will try back-seat driving," he said, adding that people never heard about friction between Tencent and Naspers, but there were a lot of "unharmonious noises" between Alibaba and its majority shareholders, which is not really a secret.
Alibaba has been trying to buy its stake back from Yahoo since 2010, but Yahoo has said no.
Keso Hong Bo, founder of the mainland's technology website DoNews and a seasoned observer of the internet industry, said Naspers trusted Pony Ma would run the firm well and Ma trusted Naspers wanted the firm to have a good future. "But the trust between Alibaba and its big shareholders is quite problematic," he said.
When Alibaba.com the world's largest business-to-business e-commerce service provider under the group, was listed in Hong Kong in 2007, Jack Ma did not ask for a special partnership structure.
Hong said Alibaba insisted on the partnership this time because the assets to go public were much more important. "This time, the core business Taobao.com is included. When Alibaba.com was listed, it was already a mature business and does not have much room for growth," he said.
A lawyer who helped Tencent in its share offer said she advised the firm on listing in Hong Kong instead of going to the United States. She said that although a large number of dotcom companies and investors in the US appreciated the value of internet firms, Tencent would be regarded as just another Chinese firm. In Hong Kong, however, it would be a star. That turned out to be true.
Shares in Tencent closed at HK$578 yesterday, 156 times above its offer price almost 10 years ago.