The Hong Kong Stop in Alibaba's Road Show Could Be Awkward

Ma Photograph by Tomohiro Ohsumi/Bloomberg

Alibaba’s road show heads toward home this week. After visits to Boston, New York, and San Francisco that attracted big crowds of American investors, the company will make stops in Hong Kong and London. The trip to Hong Kong, in particular, should be interesting. There, Jack Ma will meet with investors who are more knowledgeable about the company than most Western investors and—in at least some cases—miffed about Alibaba’s decision to take its initial public offering to the U.S. rather than Hong Kong.

Hurt pride was in the air at a recent board meeting of Li & Fung, a Hong Kong-based supply chain-logistics company, according to Warren McFarlan, who sits on the board. Such conversations have been common, he says: “There’s a lot of anger and anxiety in Hong Kong that they dared to leave and go to the New York Stock Exchange.” The emotions run particularly deep because of the extent of Ma’s celebrity in the region. There’s also a sense that Ma deprived the home team of a chance to host the year’s splashiest initial public offering.

Alibaba wrangled with Hong Kong’s stock exchange for months in an attempt to get the exchange to ease up on rules regarding corporate governance. In the end, the exchange refused to budge on its ban against Alibaba’s issuance of two classes of stock, an arrangement that will let Ma’s inner circle keep tight control of the company, even after it goes public. The exchange’s members didn’t want to be seen as bending to the will of China’s government, according to a Wall Street Journal report published in the spring. A dual-class structure has recently become common on U.S. exchanges, particularly for big tech companies.

The lack of shareholder control has also been a focus of the conversation at Alibaba’s meetings in the U.S. American investors are enamored of a company that has captured the imagination of the Chinese consumer, but they are concerned about the power China’s government could hold over Alibaba.

These issues reflect Westerners’ unfamiliarity with China and are less likely to resonate among investors in Asia, says James Cordwell of Atlantic Equities. Analysts who cover the company say conversations in the West are happening at the 101 introductory level. “A lot of the questions from U.S. investors are very rudimentary,” says Gil Luria of Wedbush Securities. The exchanges haven’t hurt Alibaba’s ability to sell stock; as of Friday, the company was considering an early end to order acceptances because of heavy demand.

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