ExclusiveAlibaba faces bumpy road in US flotation after abandoning Hong Kong offering
Mainland e-commerce giant may meet similar problems with structure in the United States, lawyers say
The United States will not be an easy option for the potential US$15 billion listing of Alibaba, which has been stuck in a war of words with the Hong Kong stock exchange and regulator over its listing plan.
Government and financial industry sources familiar with the situation told the South China Morning Post that the e-commerce giant would face similar problems regarding its shareholding structure as it did with Hong Kong authorities if it decided to list on the New York Stock Exchange or its smaller rival Nasdaq.
Unlike the stock markets in the US, Hong Kong's listing policy does not allow companies to issue two classes of shares. What Alibaba has been seeking goes even beyond dual class - an arrangement that would help founder Jack Ma Yun and his management team retain control of the company.
In the partnership structure that Alibaba has been pushing for, the average shareholder would be even more disadvantaged than the dual-class listing model the US permits, and this is why it would encounter the same resistance there as well, lawyers say.
In the system allowed in the US, equity shareholders have the power to nominate or dispose of directors. Under Alibaba's preferred structure, they would not enjoy these rights, leaving them with no effective monitoring role, said lawyers specialising in initial public offerings.
The dual-class voting structure is common in the US markets as many technology firms, including Facebook and Google, adopted it to go public. It allowed the senior management, including the founders, of Facebook and Google to retain control of the companies even as they tapped the market for funds.