Alibaba Group Holding Ltd founder Jack Ma wants to keep a tight grip on the Chinese e-commerce company he founded even after he takes it public, and U.S. law gives him several ways to do so.
A source close to the company told Reuters that Alibaba, now effectively controlled by a group of 28 "partners" including Ma, senior executives and other insiders, is intent on keeping a similar structure when it goes public. Listing in the U.S. makes that possible, a key consideration in choosing New York over Hong Kong, the source said.
Many U.S. companies, including Facebook and Google, use a dual-class stock structure to keep power within the hands of the companies' founders, Alibaba is likely to pursue a different approach, the source said.
A source close to the company told Reuters that Alibaba, now effectively controlled by a group of 28 "partners" including Ma, senior executives and other insiders, is intent on keeping a similar structure when it goes public. Listing in the U.S. makes that possible, a key consideration in choosing New York over Hong Kong, the source said.
Many U.S. companies, including Facebook and Google, use a dual-class stock structure to keep power within the hands of the companies' founders, Alibaba is likely to pursue a different approach, the source said.
But several corporate lawyers, said that one likely route for the 28 partners would be to list Alibaba by effectively creating a new partner that would become the publicly traded company.
Setting up the corporation that way - known as an "Up-C corporation," or umbrella partnership - can give the original partners much stronger voting rights, lawyers said.
While Japan's Softbank Corp, which owns 35 percent of Alibaba, and Internet company Yahoo, with 24 percent, each have a seat on Alibaba's four-person board of directors, neither company is represented among the 28 partners. In fact, there are no outside investors in the partners' group.
The partners' powers may increase after the IPO as it gains control of an expanded board of directors. Yahoo will lose its board seat when it sells half its stake in Alibaba in the IPO.
Under the structure the company envisions, Alibaba's shareholders would still have the ability to approve or reject all the directors.
Source: Reuters
