While Alibaba Group will not have to change its corporate governance too much following its second listing in Hong Kong, the company still bound to face challenges like others who have listed in two places, argued a Chinese professor.
The Chinese e-commerce behemoth had its second listing on the Hong Kong Stock Exchange on November 26.
Given the company is allowed to continue with its current controlling structure, the second listing would expanded external financing and broaden circulation channels, Zheng Zhigang, a professor with the School of Finance at the Renmin University of China, wrote for the Chinese version of Financial Times website. E-commerce is certain to face challenges in supervision and investor rights protection, Zheng added.
First, by listing in Hong Kong and New York, Alibaba is subject to the supervision of both capital markets. Regulatory authorities need to reach agreements on specific issues about supervising Alibaba. The company also needs to balance the two markets while fulfilling regulatory obligations such as information disclosure, which increases the possibility of triggering illegal operations.
Husky Energy Group, which listed on the Toronto Stock Exchange in 2000, listed in Hong Kong in May 2010, which led Zheng to believe that the market has relevant experience.
Because different legal systems would protect Alibaba’s investors, the two markets need more coordination in judicial litigation and law enforcement, Zheng said, adding that the cultural and business differences would only add to the cost of coordination.
The fluctuation of Alibaba’s stock prices in one market will probably affect the other. Zheng also expressed concern that listing in Hong Kong amid social unrest would cause Alibaba’s share prices to fluctuate easily.
Finally, Alibaba is now competing with Tencent in the same Hong Kong market. Zheng predicted that when one of them sees an increase in stock prices, the other could see a drop.
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