A senior Alibaba Group executive defended the Chinese e-commerce firm's unusual corporate structure on Thursday, a key point of contention with the Hong Kong stock exchange that sources say pushed the company to consider a U.S. debut instead.
Executive Vice Chairman Joe Tsai called Alibaba's structure, in which a group of insiders make all key operational decisions, a "living body" intended to preserve the company's culture.
Alibaba, preparing for the most highly anticipated Internet stock market debut since Facebook's, broke off negotiations with Hong Kong's exchange after regulators refused to budge on allowing the company to keep its 28-partner control structure. The company now plans an initial public offering in the United States instead, sources have told Reuters.
"We understand Hong Kong may not want to change its tradition for one company, but we firmly believe that Hong Kong must consider what is needed in order to adapt to future trends and changes," Tsai, a co-founder of Alibaba, wrote in a blog post. It was the company's first public comments since news emerged it chose to go public in the United States instead of Hong Kong. (Link to blog post:)
Alibaba, founded by Chinese Internet entrepreneur Jack Ma, is expected to raise about $15 billion in its debut. Facebook Inc raised $16 billion debut in 2012.
Some analysts estimate Alibaba is worth up to $120 billion. The company commands 80 percent of China's e-commerce market and handled a combined 1 trillion yuan ($163.36 billion)of goods last year through its main market platforms, Tmall and Taobao.
Hong Kong's failure to secure the world's largest Internet debut since Facebook means lost revenues and diminished marketing clout to attract other deals. The exchange also faces falling trading volumes and a thin IPO pipeline.
"The question Hong Kong must address is whether it is ready to look forward as the rest of the world passes it by," Tsai wrote.
Negotiations foundered after regulators decided they could not allow Alibaba's partners to retain control over board nominations, maintaining that all shareholders should be treated equally, sources have said.
Tsai's comments came a day after exchange chief executive Charles Li penned a blog post stressing that shareholder interests must come first.
Alibaba declined to comment beyond the blog post. Hong Kong exchange officials were not immediately available for comment outside of normal business hours.
"As a company with most of our business in China, it was natural for Hong Kong to be our first choice," Tsai penned.
"Those who lack appreciation of our partnership philosophy may view our proposal merely as a founder wanting to preserve control. We could not have a more different objective."