Charles Li, the chairman of the Hong Kong stock exchange, seems to have realized, in the nick of time, that with Alibaba and its much-vaunted IPO, normal rules do not apply.
Hong Kong looked almost certain to lose the listing of Chinese technology’s shining light to New York until the Hong Kong exchange, and the company’s management, seemed to think better of their respective positions after talks with the two leading US exchanges failed to result in the company selecting either one as its preferred listing choice.
This doesn’t mean that US exchanges are necessarily out of the running altogether, just that, in the latest round of jockeying that has accompanied this particular mooted flotation from the outset, Hong Kong has pulled ahead by a nose.
Hong Kong was always the preferred choice; negotiations with New York started more out of a need to scope out a possible alternative than a particular desire to list in the Big Apple.
But for a while it seemed that the reluctance of Hong Kong exchange officials and regulators to bend rules to allow a company with a less than traditional structure to continue along its chosen path with a certain degree of control would prove a dealbreaker.
The partners of Alibaba want a structure that will allow them to retain control of the majority of the company’s board even after an IPO. Hong Kong regulators initially said they objected to that shareholder structure, leading to the breakdown of talks and the retraining of the company’s sights on New York.
But Li might have done all those in Hong Kong who stand to benefit from an Alibaba IPO there – almost everyone – a big favour by striking a more thoughtful and conciliatory note just as it became clear that a deal with New York had not yet been done.
In a blog post he asked the question: "Why do innovative companies deserve special consideration when it comes to governance?" He answered by writing: "Their success comes largely from the founder’s unique vision and plan, rather than other factors that drive business in traditional companies. Protecting the founders and allowing them to deliver on their vision is usually in line with shareholders’ interests."
Even more encouragingly for Alibaba, Li went on to say that the conflict between protecting shareholders and giving founders special concessions was not one that was irreconcilable "if the system is designed properly". You can only conclude that Li intends to design the system properly himself and make sure that Alibaba doesn’t go down as a massive one that got away.
He might yet snatch victory from the jaws of what seemed like a resounding defeat at the hands of New York. And that will be an important win for Hong Kong, whose IPO market has been moribund for some time.