Alibaba Group Holding Ltd. has asked Hong Kong’s stock exchange to let its partners nominate a majority of the e-commerce giant’s board, said a person with knowledge of the matter, a move that would keep executives in control if the company lists in the city.
Alibaba, which may undertake the largest initial public offering since Facebook Inc., has more than 20 partners -- including billionaire Chairman Jack Ma, co-founder Joseph Tsai and Chief Executive Officer Jonathan Lu. Hong Kong doesn’t allow dual-class structures that give some shareholders voting rights that are larger than their stake, so the proposal suggests Ma would prefer to take his company public in the city if top executives can retain some control.
Ma, a former English teacher who founded Alibaba in 1999, owns about 7 percent of the company’s shares. It isn’t clear if the group of partners includes Alibaba’s larger shareholders SoftBank Corp. (9984) and Yahoo! Inc. (YHOO:US), or how many partners there are.
Under Alibaba’s plan, the nominees would still be approved by shareholders, and the partners may nominate an alternative director if a candidate is rejected, the person said, asking not to be identified because the discussions are private.
The company could raise about HK$100 billion ($12.9 billion) in an IPO, Ernst & Young LLP said in June. That would make it the world’s biggest sale since Facebook raised $16 billion in May of last year, and Hong Kong’s largest since AIA Group Ltd.’s $20 billion sale in October 2010, according to data compiled by Bloomberg.
Hong Kong has been home to only four IPOs larger than $10 billion, the data show.
The proposal wouldn’t change any shareholder rights, the person said. Connected-party transactions, major expenditures and compensation for senior executives would be voted on by all shareholders, according to the plan. The Hong Kong Economic Times reported some details of the partnership proposal.
“I don’t think putting that in the company’s articles of association is going to work,” David Webb, founder of local governance watchdog Webb-site.com said yesterday. “That would be unprecedented.”
Florence Shih, a Hong Kong-based spokeswoman for Alibaba, declined to comment yesterday, as did Henry Law, a spokesman for Hong Kong Exchanges & Clearing Ltd.
Swire Pacific Ltd. has two classes of shares on the Hong Kong exchange, both of which were listed before rules banned the practice.
Investment banks have valued Alibaba at as much as $120 billion amid surging demand for services connecting businesses and consumers in the world’s most-populous nation.
In a July 17 report, Evercore Group LLC estimated an Alibaba IPO could value the company at $120 billion, based on a forecast that operating profit could reach $7.1 billion in 2014. Goldman Sachs Group Inc. on July 22 put Alibaba’s value at about $105 billion.
The IPO of Mark Zuckerberg’s Facebook valued the company at $104 billion, and the shares lost as much as half their value in the first few months of trading before starting to recover.
Alibaba’s profit in the latest quarter more than tripled from a year earlier to $669 million, Yahoo said in July. The Chinese company’s net income margin is double that of Apple Inc.
Alibaba doesn’t sell merchandise itself. Instead, it runs platforms including Taobao Marketplace and Tmall.com that connect retail brands with consumers, a cross between Amazon.com Inc. and EBay Inc. It makes most of its sales from commissions and advertising.
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