Alibaba abandons Hong Kong for New York, sources say

The e-commerce giant wants US regulators to accept its executive partnership structure

PUBLISHED : Wednesday, 25 September, 2013, 2:52pm
UPDATED : Thursday, 26 September, 2013, 11:46am

Alibaba Group will try to convince New York regulators to accept its controversial executive partnership structure and list shares there after abandoning efforts to persuade Hong Kong authorities of its merits, a banking source close to the potential HK$100 billion transaction said.

The decision to stick with the partnership arrangement rather than a straightforward dual share-class structure allowed under New York listing rules signals the determination Alibaba founder and chairman, Jack Ma Yun, has to keep his vision of corporate culture intact, the source told the South China Morning Post.

"It is the structure Jack Ma believes will be best for the future of the company," the banking source said. Legal industry sources say Alibaba has already appointed at least two US law firms to handle the deal.

The decision to focus on New York came just hours before regulators here were due to review a fresh proposal floated to Hong Kong Exchanges and Clearing's listing committee. Sources close to the listing authorities said Alibaba had been prepared to cut the number of partners and bind them to a three-year share sale ban if regulators were willing to approve the management structure.

The e-commerce giant's planned listing had been in limbo because regulators worry the partnership structure gives top executives more rights than ordinary shareholders by allowing them to nominate a majority of candidates for election to the firm's board of directors.

Sources close to Alibaba insist the firm does not want a dual share structure or a change to rules. Instead, it had sought an exemption under an existing rule in the Hong Kong listing code.

Ma revealed fresh details about the partnership scheme earlier this month, setting them in the context of his vision of maintaining Alibaba's corporate culture, a move analysts saw as trying to soothe concerns.

Ma and his top executives own about 10 per cent of the company, compared with about 24 per cent owned by United States internet firm Yahoo and about 37 per cent by Japan's SoftBank.

Investment bankers who have met Ma had told him a New York listing would be his best bet for securing the control he craves. The stand-off in Hong Kong had seen Alibaba hire a slew of advisers to help lobby officials and rally public opinion.

Sources close to the Securities and Futures Commission, Hong Kong's ultimate listing authority, have consistently said that a structure giving one group of shareholders more power than another would be unacceptable.

Experts say, however, Alibaba has missed its window to sell shares in New York this year.

Sources close to Ma say Alibaba's top management have decided an initial public offering should not be rushed.