Mike Isaac

Recent Posts by Mike Isaac

Alibaba Defends Corporate Structure in Lead-Up to IPO

alibaba_logo-featureAlibaba’s co-founder and vice chairman, Joe Tsai — and the rest of the 28-partner control group — believes in the Chinese company’s corporate governance structure.

So much so, in fact, that the company is willing to publicly play negotiation hardball with the Hong Kong stock exchange in the weeks leading up to one of the most hotly anticipated tech company initial public offerings since Facebook.

Tsai released a blog post Thursday morning, publicly confirming that the talks between Alibaba and the Hong Kong exchange had broken down over the exchange’s objections around Alibaba’s current governance structure. In Alibaba’s preferred method, the company’s founders would retain majority control after taking the company public.

“We proposed a governance structure that would enable Alibaba’s partners … to set the company’s strategic course without being influenced by the fluctuating attitudes of the capital markets so as to protect the long-term interests of our customers, company and all shareholders,” Tsai wrote.

That, essentially, would mean granting Alibaba a dual-class voting structure for its shares, a type of organizational structure quite common to U.S. companies (including Google and Facebook) but prohibited by the Hong Kong exchange.

“Those who lack appreciation of our partnership philosophy may view our proposal merely as a founder wanting to preserve control,” Tsai wrote. “We could not have a more different objective.”

As a result of the talks breaking down, Alibaba will likely seek a U.S. exchange for its IPO.

“The question Hong Kong must address is whether it is ready to look forward as the rest of the world passes it by,” Tsai wrote.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik