(Adds changes throughout.)
By Matt Jarzemsky and Juro Osawa
Alibaba Group Holding Ltd. took its feud with the Hong Kong
stock exchange public, questioning why the exchange wouldn't bend
its rules to allow the Chinese e-commerce company to list its
shares there.
Alibaba wants to structure its initial public offering, which
could value the company at $70 billion, to allow the company's
founders to retain control. But talks with the Hong Kong stock
exchange broke off when the two sides couldn't reach agreement on
that structure. Alibaba is now moving toward listing its shares in
the U.S., people familiar with the matter have said.
Joe Tsai, an Alibaba co-founder and vice chairman who has been
leading the IPO effort, said in a post on the company's website
that talks with the Hong Kong exchange had ended. A spokeswoman for
the exchange declined to comment Thursday.
"As a company with most of our business in China, it was natural
for Hong Kong to be our first choice," Mr. Tsai said in the
post.
After repeating the company's argument that it wasn't trying to
disadvantage minority shareholders with the IPO's structure, he
said the exchange should consider what is necessary to adapt to the
future. "The question Hong Kong must address is whether it is ready
to look forward as the rest of the world passes it by," the letter
ends.
Alibaba's much-anticipated debut would be the largest technology
IPO since Facebook Inc.'s (FB) last year, with analysts estimating
it could value the company at $70 billion or more.
The deal is also seen as a key test of investors' appetite for
bets on China's fast-growing consumer market. Alibaba, the
country's biggest e-commerce company, operates online shopping
sites such as Taobao and Tmall.
At issue is Alibaba executives' desire to maintain a measure of
control over the firm after it goes public. Hong Kong Exchanges
& Clearing Ltd. (0388.HK), or HKEx, owner of the Hong Kong
exchange, doesn't allow dual-class voting, a common structure in
the U.S. that enables insiders to control a company after its
IPO.
Facebook, Google Inc. (GOOG) and other companies organized that
way can issue two classes of stock with different voting rights,
giving founders and corporate officers a greater say in shareholder
votes.
Alibaba had held talks with the Hong Kong exchange over a
proposal allowing the company's partners to nominate a majority of
its directors after its debut, people familiar with the matter have
said.
Even as Alibaba is moving toward a U.S. listing, the company,
rather than pursuing a dual-class voting structure, plans to adopt
the board-nomination system it has proposed to the Hong Kong
bourse, said one of the people familiar with the situation. In his
posting, Mr. Tsai said the company "never made any proposal that
involved a dual-class shareholder structure."
A plan to list in the U.S. would set up a battle between NYSE
Euronext's (NYX) New York Stock Exchange and the Nasdaq Stock
Market, operated by Nasdaq OMX Group Inc. (NDAQ). NYSE has won
two-thirds of listings by Chinese companies in the U.S. since 2007,
according to Dealogic. Such a development would mark a setback to
Hong Kong's stock exchange, which was the world's top venue for new
listings in 2011 but has struggled to regain that stature
since.
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