Alibaba IPO talks ‘broke down’
Company wants partnership control of board nominations in Hong Kong
HONG KONG: Alibaba Group Holding Ltd’s talks with the Hong Kong stock exchange for an initial public offering broke down after it sought partnership control of board nominations, and the company is moving toward a US listing, according to a person familiar with the matter.
China’s largest e-commerce company was seeking US law firms to help with an IPO and hadn’t hired banks yet, said the person, who asked not to be identified because the process is private. Alibaba declined to comment on developments in an e-mail yesterday.
The company wanted its partners to nominate most of the board, a person familiar with the matter said last month.
Investment banks have valued Alibaba, founded by former English teacher Jack Ma, at as much as US$120bil, which would make it the third-biggest Internet company behind Google Inc and Amazon.com Inc based on market capitalisation. Losing the Alibaba IPO would be a blow to Hong Kong, which doesn’t allow dual voting classes on new listings and hasn’t hosted a first-time share sale of more than US$4bil since October 2010.
“Jack Ma really insisted on the partnership structure,” said Billy Leung, an analyst at RHB Research Institute Sdn Bhd in Hong Kong. “If you give it to them, then you give it to everyone. Alibaba has been waiting for so long, they just said let’s go to the United States.”
Alibaba could raise about HK$100bil (US$12.9bil) in an initial sale, Ernst & Young LLP said on June 28. That would make it the world’s biggest IPO since Facebook Inc raised US$16bil in May of last year, and Hong Kong’s largest since AIA Group Ltd’s US$20bil sale in October 2010, according to data compiled by Bloomberg.
Lorraine Chan, a spokeswoman for Hong Kong Exchanges & Clearing Ltd, declined to comment, citing a company policy against commenting on individual cases.
The IPO of Mark Zuckerberg’s Facebook valued the company at US$104bil, and the shares lost as much as half their value in the first few months of trading before starting to recover. The stock closed at US$48.45 Tuesday in New York, compared with its US$38 offering price.
Alibaba is considering a more conservative valuation than Facebook for its IPO, a person with knowledge of the matter said earlier this year. It bought back a 20% stake from Yahoo! Inc last year in a deal that valued the Chinese company at US$35bil.
Alibaba’s profit in the latest quarter tripled from a year earlier to US$669mil, Yahoo said in July. Facebook earned US$217mil in the same period and Tencent posted net income of 4.04 billion yuan.
Allowing Alibaba’s partnership to control board nominations would enable Ma, who owns 7.4% of the stock, and his management team to maintain control. Yahoo owned about 24% of Alibaba and Japan’s SoftBank Corp about 37%, the companies said separately in July.
Hong Kong’s bourse doesn’t allow share classes with different voting rights, as the United States does. Such arrangements helped Zuckerberg and Google co-founders Larry Page and Sergey Brin keep control of their companies after they went public. – Bloomberg