E-commerce giant Alibaba Group announced Sunday that it will launch its initial public offering (IPO) in the United States, putting to rest months of speculation over its listing venue.
The US listing, said to be worth about US$15 billion, represents a setback for Hong Kong, which had initially been the first choice for the Chinese firm to go public. Regulatory issues related to the company’s partnership structure forced Alibaba to skip Hong Kong and opt for a New York float.
The listing will make it a more global company and enhance its transparency, as well as allow the group to further pursue its long-term vision, Alibaba said in an emailed press release.
Should circumstances permit, the group will consider extending its public status to the Chinese capital markets in the future in order to share its growth with the Chinese people, it said.
Meanwhile, referring to the problems it had with Hong Kong regulators, Alibaba said it respects the viewpoints and policies of Hong Kong. It added that it will continue to pay close attention to and support the process of innovation and development of Hong Kong.
Alibaba’s US listing is a big blow to investment bankers, lawyers and accountants in Hong Kong, in terms of lost opportunity for huge fee income. The company’s decision, meanwhile, puts a question mark over the attractiveness of Hong Kong as a fund-raising platform for Chinese technology companies, observers say.
As Alibaba may eventually also choose to list in China’s A-share market, Hong Kong may probably lag behind Shanghai in terms of IPO fund-raising.
The setback is much bigger than the central government’s decision last month to take away Hong Kong’s right to host the meeting of Asia-Pacific Economic Cooperation (APEC) finance ministers and central bankers later this year. Technology and internet stocks listed in Hong Kong, including Tencent Holdings (00700.HK), may come under some pressure in the short term.
Technically, Hong Kong should have been able to serve the Alibaba deal by the end of this year if the regulator and the company were able to reach a compromise on the shareholding structure matter, observers said.
“A dual-class share structure is workable in Hong Kong but more should be done to protect the majority shareholders who don’t enjoy the nomination right,” Edward Au, co-Leader of National Public Offering Group at Deloitte China, told EJ Insight in December last year.
Patrick Wong, a partner at law firm Mayer Brown JSM, suggested that a founder who does not hold a majority stake in his firm should lose the nomination right after five years from the listing date. The founder can renew his term by opting for re-election every five years.
State Council calls for people-focused urbanization
China’s State Council stressed Sunday that the nation’s urbanization efforts must be people-oriented, Shanghai Securities News reported Monday. The comments came as authorities map out urbanization policies for 2014-20, the report said. Professor Xu Hongcai, deputy director of Information Department at the China Center for International Economic Exchanges, said urbanization will involve massive investments and bring huge job opportunities as authorities step up spending on infrastructure such as railways, electricity, gas, water and sewage facilities.
PBoC doubles yuan trading band
The People’s Bank of China is doubling the daily trading band of the renminbi against the US dollar from today, China Securities Journal reported. The Chinese currency will be allowed to fluctuate 2 percent from the central parity rate, up from 1 percent previously. The decision is part of efforts to increasingly open the renminbi exchange rate to market forces, the report said. It is expected to stem the flow of hot money, Lu Zhengwei, chief economist of Industrial Bank, was quoted as saying. The currency may strengthen this year, the report said.
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