Alibaba's IPO Dilemma: Hong Kong or New York?
(7 pages of text)
In April 2014, Alibaba’s impending initial public offering (IPO) projected to be among the world’s largest IPOs. Alibaba faced many choices regarding ownership structure, trading location, IPO pricing and IPO timing. The Hong Kong Stock Exchange seemed like a natural fit for its IPO due to geographical, cultural and language proximity. Furthermore, 86.7 per cent of Alibaba’s revenues originated within China. However, Alibaba insisted on “partnership governance,” while the Hong Kong Stock Exchange did not allow listing of companies with dual-class share structure. In contrast, the New York Stock Exchange and NASDAQ did not object to Alibaba’s proposed ownership structure. While the Hong Kong investors knew Alibaba’s business better, the New York exchanges provided more liquidity and visibility. Against this backdrop, Alibaba needed to make difficult decisions regarding its IPO.
This case is designed for a course in corporate finance on the topic of raising funds via an IPO. The case also allows discussion of emerging markets (in particular, China) and differences between the Hong Kong and New York stock exchanges. Alternatively, the case could be used in a module on corporate governance and ownership structure — and specifically, dual-class share structure. It can also be used in a course on finance strategy.
Information, Media & Telecommunications
China, Large, 2014
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