Hong Kong Exchange Chief Sends Signal to Alibaba-China-Gold Brand Consulting

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Hong Kong Exchange Chief Sends Signal to Alibaba 2013-10-28 16:38:42 Release　Author：cuyoo　Read Flow：2600次: The head of Hong Kong's stock exchange wants a fresh debate on whether to allow alternative shareholding structures, in a move that signals a growing desire for new rules as the bourse faces the potential loss of Alibaba Group Holding Ltd.'s prized listing to New York.

Hong Kong Exchanges & Clearing Ltd. Chief Executive Charles Li posted a blog on the firm's website late Thursday urging market participants to rekindle the discussion on whether there is a place for alternative shareholding structures such as the one proposed by Alibaba, which, according to people familiar with the e-commerce company's thinking, sought an exemption that would allow a group of 28 partners who own about 10% of the company to nominate a majority of its corporate board.

The bourse drew criticism after talks between its listing committee and Alibaba collapsed in September, with the company publicly questioning the exchange's intransigence.

Over the past several weeks, Alibaba has been in talks with the New York Stock Exchange and the Nasdaq Market over a possible U.S. listing, though the company hasn't necessarily settled on New York, according to people familiar with the situation. On Monday, the company said it had received written confirmation from both the New York bourses that its proposal to let its partners have some control over its board would be acceptable.

Mr. Li may hope that his comments will prompt Alibaba to give Hong Kong another chance, though he stopped short of making a direct plea.

'Losing one or two listing candidates is not a big deal for Hong Kong; but losing a generation of companies from China's new economy is. And losing it without a proper debate is even more unacceptable,' he wrote.

His views will be seen as a nod to critics of regulators who have remained steadfastly opposed to the Alibaba proposal. On the other side, analysts have said the Hong Kong Stock Exchange has boosted its reputation for corporate governance in a region swamped by opaque ownership structures by holding out against Alibaba's demand for its senior management, including founder Jack Ma, to retain control over the board after going public.

Alibaba's proposed structure is seen by the company's management as a way to preserve its culture and leadership by a group of individuals who have mapped out a long-term vision for its future, people familiar with the company's thinking said.

'Arguably, because these founders are so vital to their companies, protecting them is also a form of investor protection. In fact, most international markets are willing to allow shares with differentiated voting rights,' Mr.Li wrote.

Rather than endorsing sweeping changes, the bourse's CEO said any rule change should be limited to a select type of company.

'If it is because of the uniqueness of founders and innovative companies, then we would have to carefully define these terms to limit their application. They shouldn't apply to everyone.,' Mr. Li wrote.

His comments may be taken as a response to hints earlier this month that the company would revisit the idea of listing in Hong Kong.

Earlier this month Alibaba Vice Executive Chairman Joe Tsai, who leads the company's IPO discussions, told Chinese-language media site Pingwest that if a certain stock exchange--he didn't actually name Hong Kong--feels a sense of regret and tries to bring Alibaba back to the market, the company would consider that option.

Speaking with reporters from Hong Kong's local media this week, Alibaba Chief Executive Jonathan Lu said, 'Hong Kong may need some time to understand the creative management structure for a creative company,' according to the South China Morning Post.

Mr. Lu didn't clearly say whether Alibaba would consider resuming listing discussions with the Hong Kong exchange.

Alibaba has said repeatedly that it hasn't set either a timetable or a venue for its IPO. The company has also said that it hasn't yet appointed any banks as underwriters.

Hong Kong's exchange makes around 15% of its revenue from fees earned on new listings. In the six months ended June 30, listing fees ticked higher to 496 million Hong Kong dollars (US$64 million) compared with HK$462 million a year earlier, according to the bourse operator.

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Hong Kong Exchange Chief Sends Signal to Alibaba