China's Alibaba Group has denied it is favoring the U.S. over Hong Kong for its highly anticipated IPO, following reports the company's management structure does not meet requirements stipulated by the Hong Kong Stock Exchange.
A company spokesperson in Beijing reiterated that it had yet to make a final decision on when and where it will list its IPO, which is estimated to raise up to US$75 billion. "Reports claiming that Alibaba has chosen the U.S. over Hong Kong are not true," the Alibaba official said in a report Friday by China Daily.
According to a Reuters report Thursday, the Chinese Internet giant was seeking an IPO in the U.S. after discussions with Hong Kong regulators fell through following their decision not to allow Alibaba's top management to retain more voting rights over ordinary shareholders.
Alibaba's executive vice-chairman Joe Tsai said in a blog post: "Hong Kong must consider what is needed in order to adapt to future trends and changes."
Pointing to its charter, Hong Kong Stock Exchange CEO Charles Li said it was unlikely to compromise its rules for Alibaba: "In the event of a conflict, public interest is put ahead of shareholder interest [at Hong Kong Exchange]." The exchange's charter states all shareholders should have equal rights.
According to China Daily, the Chinese e-commerce giant had attempted to strike a compromise by asking for the right of its partners to nominate the majority of its board members.
Exchanges in the U.S. including Nasdaq and the New York Stock Exchange allow dual-class stock structures which are used by tech companies such as Facebook and Google. This gives the company's founders and management more voting rights than ordinary shareholders. Facebook's founder Mark Zuckerberg, for instance, retains control after the company's IPO last year where his shares contain 10 times the voting rights of ordinary shares.
Hong Kong was the leading destination for IPOs between 2009 and 2011, but several organizations had held off their IPOs in the territory this year amid weak market sentiments, China Daily noted. Nexteer Automotive Group, for instance, in July postponed its IPO which was projected to have raised up to HK$2.5 billion (US$322.4 million).
Should Alibaba's IPO take off, Singapore's Temasek Holdings would be looking at significant returns. The investment firm, along with partners Silver Lake and DST, bought Alibaba shares worth US$1.6 billion in 2011 when the Chinese company was valued at US$32 billion. Analysts today put Alibaba's value at up to US$120 billion, indicating hefty returns for shareholders such as Temasek if they cashed in.
Alibaba earlier this week opened an office in Singapore to support its e-commerce business unit, Taobao Marketplace, and serve as its Southeast Asia hub. In its first-quarter results, the Chinese group tripled its net profit to US$669 million, with a 71 percent climb in revenue and on margins of 48.4 percent. Its profitability was double that of Apple's 21.9 percent for the same period.