Sleep talker

You snooze, you lose: Li

As far as nightmares go, Alibaba’s decision not to IPO in Hong Kong has been a pretty big one for Charles Li. So last week the head of Hong Kong’s stock exchange came up with a dream solution of his own.

The background to the dispute has been widely reported. Alibaba wants an arrangement that gives Jack Ma and his senior executives control over nominations to the board despite holding a minority of the company’s equity. But the exchange has refused and the likelihood is that Alibaba will switch its listing to New York instead.

Joseph Tsai, a founder at the e-commerce giant, made Alibaba’s case again this week on a company blog. “Our overarching objective is to maintain the culture,” he insisted. “This clear sense of mission, long-term focus and commitment to values defines the Alibaba culture and it is what makes us successful.”

It seems that Alibaba isn’t confident that it can maintain its cultural identity in the full glare of a public listing. Tsai suggested that other companies might take a similar stance, warning: “The question Hong Kong must address is whether to look forward as the rest of the world passes it by.”

Others were scornful of the request for special status. David Webb, a former banker who offers independent commentary on the Hong Kong financial scene, was particularly biting. “You have to marvel at the breathtaking arrogance and hubris that comes from being a successful e-commerce firm in a sheltered market where foreigners cannot directly own telecommunications companies or payment systems,” he snorted.

Then Webb bashed Tsai’s view that Alibaba executives would also be owners of the business, aligning their interests with the wider shareholding body. “Um no, Joe,” he countered. “The shareholders are the owners of the business. Get it right. You are either a partnership where the partners provide all of the equity, or a company, where the shareholders do. You can’t be both.”

Two days earlier, Charles Li had taken to the blogosphere too. And while critics say that his Hong Kong bourse was inflexible in refusing Alibaba’s request, WiC can’t fault Li’s creativity in explaining the reasoning behind the decision.

Li’s account takes on a Dickensian dimensions, reading like a version of A Christmas Carol as he describes the competing voices that have been dominating his dreams.

Mr Tradition is first up, arguing that there is no reason to change Hong Kong’s existing rules. “If it isn’t broken, why fix it?” Tradition ponders, “heavily shaking his head”.

This isn’t to the liking of Mr Innovation, a “young man with spiky hair” who talks “fast and excitedly” in favour of the proposition. “What’s wrong with different share structures?” Innovation asks. “It’s just you Hong Kong stick-in-the-muds who can’t accept change.”

Next to speak is dull old Mr Disclosure, with a treatise on how the market will price special voting rights appropriately if given the full information.

Mrs Practical also sounds open to Alibaba’s request, arguing that Hong Kong has made bold moves before by introducing new types of equity like H-shares and Red Chips.

Such sentiment is swatted away by Mr Righteous who insists that Hong Kong mustn’t sell its soul for a few big paydays. “Why should we learn from the Americans?” he scoffs. “Look at what they did to the world in the financial crisis with the so-called innovations of Wall Street.”

Other characters feature in Li’s fevered slumber too. But maddeningly our dreamer wakes just as Mr Solution is about to make an appearance.

At this point, Li swaps his duvet for his office desk. And unfortunately his recollections of the night before have much more zip than his conclusions on the dispute. Hong Kong’s public interest comes before shareholder interests, Li says, and the final decision belongs to the Listing Committee, not to him personally. And he wants to make it clear that he isn’t trying to advocate any particular position, just promote an honest debate.

It sounds like Mr Noncommittal may have paid Li a nocturnal visit, too.

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