The Securities and Futures Commission (SFC) has held a board meeting to discuss how to accommodate a listing by mainland internet giant Alibaba, signalling a possible way forward for a deal that could be worth HK$100 billion.
News of the meeting, disclosed to the South China Morning Post on condition of anonymity by sources with first-hand knowledge of the talks, comes as sources close to Alibaba seek to portray Hong Kong listing rules as outdated and out of touch with modern business needs.
SFC officials say Hong Kong's ultimate authority for financial markets is no dinosaur and would be willing to consider any proposal from Alibaba that ensures the regulator delivers on its mandate of maintaining investor protection.
"We have a mission, we have a bottom line, and that is investor protection," said one SFC source, who declined to be identified.
Sources with first-hand knowledge of the meeting told the Post that the SFC had ruled out any change that could be seen as giving Alibaba, founded by teacher-turned-entrepreneur Jack Ma Yun, exemptions from existing listing conditions.
That includes a plan, floated by sources close to Alibaba, to allow the firm's senior management to maintain a partnership structure to nominate a majority of board candidates, on whom shareholders would then be allowed to vote.
The mainland's biggest e-commerce company, which is expected to list its shares before the end of this year, has more than 20 partners including Ma, his co-founders and senior executives.
Ma and the management team own a combined 10.4 per cent stake in Alibaba. Japan's SoftBank and US internet giant Yahoo, which own more than 60 per cent of the firm, are not included in the partnership programme, which was established in 2009.
Investment bankers who have met Ma have told him that a New York listing would be his best bet for securing the control he craves.
Alibaba has declined to comment formally on its listing plans and the talks it has had with Hong Kong's listing authorities.
Sources close to Alibaba, however, insist that the firm has never wanted a dual structure and remains agnostic about a listing location, provided the control issue is resolved in a way that suits the company's management.
A source close to Hong Kong Exchanges and Clearing, which would have to agree a listing application before the SFC ruled on it, told the Post that it was also against granting special one-off exemptions, but it would be willing to consider a wider public consultation to review listing rules.
"Such a review is not tailor-made for Alibaba," the source said. "But a review sooner or later makes sense to ensure our market structure is best suited to what the market needs."
Critics of Hong Kong's strict listing rules say they are to blame for the loss of several high-profile - and high-value - share offers to rival overseas exchanges, including the US$234 million listing last year by Manchester United, which was done in New York.
No formal listing application has been made by Alibaba.