Hong Kong Stock Exchange faces difficult decision in Alibaba IPO: Bloomberg

August 27
10:37 PM 2013

Bloomberg reported the quandary of the Hong Kong Stock Exchange on the proposed initial public offering of Alibaba. Should it grant China's largest e-commerce firm shareholder structure that would enable it to retain control or should it insist on enforcing its provisions that safeguard the rights of ordinary investors? Choosing the latter could potentially cause the bourse to lose the biggest IPO since Facebook.

Last week, Alibaba asked the Hong Kong bourse to give it the right to nominate majority of the board members to the company's partnership comprised of more than twenty executives and shareholders. Should this be approved, founder Jack Ma and his management team would retain control of Alibaba after the IPO. Ma currently holds just 7.4% share of Alibaba.

The Asian Corporate Governance Association (ACGA) said giving in to Alibaba's proposal would put the bourse under fire. Investors would criticize the Hong Kong Exchange for putting the firm's interest first before that of the shareholders. ACGA Secretary General Jamie Allen said he is certain that the request won't be granted. He told Bloomberg, "The right to nominate directors is a basic right, so we don't believe that the exchange will accept this."

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