The Chinese e-commerce giant chose New York for its IPO because of Hong Kong Stock Exchange (HKEx)’s reluctance to allow the listing of a company with such a stock structure that would give its management different voting rights from that of its public shareholders—and the Alibaba stock structure does exactly that. HKEx insisted that all shareholders should receive voting rights proportional to the number of shares they hold.
Alibaba calls its own stock structure “Alibaba partnership,” which was originally designed to allow a group of 27 managers to stay in control. In other words, the group has the right to name the majority of Alibaba’s directors, giving them effective control of the board and of the company’s strategic direction. Essentially, Alibaba’s partnership structure has the same effect as a dual-class stock structure, which gives some shareholders more voting rights than others, allowing the company’s founders to maintain control and power, according to Prof. Wang Cong, an associate professor at the Department of Finance of the CUHK Business School, who specializes in corporate finance.
Jack Ma, founder and Executive Chairman of Alibaba, has said that his company’s “partnership structure” aims to preserve the firm’s culture shaped by the founders and can help the company avoid short-term behavior at the expense of long-term growth.
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