China’s Alibaba Shuns Hong Kong Bourse, Targets U.S. for IPO Plan

China's Alibaba, the country's largest e-commerce company, has shunned the Hong Kong bourse for its planned initial public offering (IPO). Reportedly estimated to be worth $70 billion up to $120 billion, the IPO is being mulled to be organized in the U.S., either by the New York Stock Exchange or Nasdaq.

Alibaba would have wanted the IPO done in its home market, but negotiations bogged down after the company rejected the Hong Kong bourse's ruling that Alibaba's partners cannot retain control over board nominations.

"We've come to the end of dialogue with Hong Kong and we're pivoting to the U.S. to start the listing process," Reuters quoted an unidentified company source. The Hong Kong Stock Exchange has long held and maintained the ruling of no-dual classes of stock and other types of mechanisms just so a company can preserve corporate control. Suffice to say, once a company sells on the Hong Kong bourse, it should expect to withdraw this, something which Alibaba does not want.

In a report by the New York Times, citing an unidentified source, Alibaba allegedly submitted "a waiver to permit a listing that allows a group of senior leaders who have formed a partnership inside the company" the right to nominate a simple majority of the board. This person also added that "all other shareholder rights remain intact, including the right to elect or reject the entire board."

Founded the company in 1999, Alibaba is owned 10 per cent by its 28-member partnership board.

"We believe that only a group of people who are passionate about the company and are mission-driven will be able to protect the company from external pressure from competition and temptation to seek short-term gains," Jack Ma, founder, wrote in a recent letter to employees.

Not much excitement has happened in the U.S. bourse since the time of the $16 billion IPO listing of Facebook in 2012.

"It is a substantial blow for the Hong Kong stock exchange," David Neuville, a partner in the Hong Kong office of the law firm Cadwalader, Wickersham & Taft, was quoted by the New York Times.

Alibaba's IPO was expected to generate as much as $15 billion for the Hong Kong Stock Exchange. Bankers and lawyers in Hong Kong would have received enormous fees.