HONG KONG Alibaba Group founder Jack Ma revealed details of its internal partnership structure on Tuesday, ratcheting up pressure on Hong Kong regulators as they grapple with the ecommerce giant's initial public offering plans.
The two sides are debating the ability for Alibaba to list in Hong Kong and, at the same time, allow its "partners" - a group of founders and senior employees - to keep control over the makeup of its board.
Hanging in the balance for Hong Kong is the highly anticipated offering, which could be the largest technology IPO since Facebook Inc's $16 billion listing last year.
Ma sent a company-wide email on Tuesday, formally announcing for the first time details of the partnership model and explaining the importance of maintaining the system. The contents of the email were confirmed by an Alibaba spokesman.
Alibaba wants to keep key decisions with its partners by giving the group made up of 28 senior employees the right to nominate a majority of its board.
Regulators in Hong Kong however, are concerned the structure would give too much voting power to Alibaba's founders and senior managers and not enough to outside investors.
The partnership was designed to "safeguard the culture of innovation" and protect the company from the "temptation to seek short-term gains," Ma said in the email. The partnership is not aimed "to exert greater control over the company," he wrote.
Ma's comments add pressure on the Hong Kong exchange and local regulators to allow Alibaba Holding Ltd to list with its partnership scheme in place. The company has been lobbying regulators to allow the e-commerce giant to keep the partnership system intact after its planned IPO, but the company's efforts have so far met with resistance, according to Hong Kong media reports.
"This level of negotiation is fairly unprecedented, in terms of seeking special conditions," said Jamie Allen, secretary general of the Asian Corporate Governance Association.
Technology companies in certain cases have used dual-class voting shares to keep control over their companies after they go public. However, Hong Kong Exchanges and Clearing Ltd has resisted any moves by companies to use structures that treat shareholders differently.
Hong Kong's Securities and Futures Commission, the city's main securities watchdog, has also stood tough on the issue of dual shares.
People familiar with the listing plans have said Alibaba is inclined to have its IPO in Hong Kong, although New York remains an option.
For its part, Alibaba is "not concerned about where to go public, but we do care that wherever we end up going public must support this type of open, innovative, responsible culture that values long-term development," Ma said.
(Reporting by Elzio Barreto; Editing by Matt Driskill and Michael Flaherty)