Corporate China | Listings: Alibaba in setback, Spreadtrum bows

Alibaba is likely to move ahead with a plan to list in Hong Kong despite its failure to get a rule exemption it was seeking from the securities regulator.

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Published: 9:13am, 8 Sep 2013Updated: 9:13am, 8 Sep 2013

There are some interesting news bits at opposite ends of the listing spectrum today, with word that e-commerce giant Alibaba has received a setback in its plans for a Hong Kong IPO, while chipmaker Spreadtrum (Nasdaq: SPRD) is on the cusp of de-listing from the Nasdaq. In the middle of the spectrum is newly listed e-commerce firm LightInTheBox (NYSE: LITB), whose honeymoon after its June IPO has abruptly ended with a rapid tumble in its share price which has resulted in a newly filed shareholder lawsuit.

All of this news underscores the fact that while it's prestigious and advantageous to be a publicly listed company, such listings also carry a certain level of risk. That risk can be especially high for inexperienced Chinese companies, which are often unfamiliar with the many sharks that troll the waters of stock markets in New York and increasingly in more distant locations like Hong Kong.

Let's start off with a look at Alibaba, which would reportedly prefer to make its highly anticipated multibillion-dollar IPO in Hong Kong. The only problem is that Alibaba founder Jack Ma wants to structure the deal in a way that lets his management team and other major investors maintain control of the company, which isn't allowed under Hong Kong stock exchange listing rules.

Previous reports indicated that Alibaba was trying to negotiate an exception to the rules, but now media are reporting that those talks have ended with the securities regulator's refusal to yield to Alibaba. On the one hand, I can sympathize with Ma to some extent, as he was previously frustrated after his sale of 40 per cent of his company to Yahoo (Nasdaq: YHOO) in 2005 ultimately led to numerous clashes with the US search giant.

But at the same time, Ma should also realize that you can't just take people's money without giving them some voice in your company, which is what he seems to want to do with his bid for an exception to the Hong Kong listing rules. It will be interesting to see if Ma now decides to take his IPO to New York, which would also love to host the mega-offering and where the structure Ma wants would be permissible. My guess is that he will ultimately decide to list in Hong Kong, since he's likely to get a better valuation and longer term investor interest there due to the market's closeness to China.

Moving on, there's not too much to say about Spreadtrum's imminent de-listing, after shareholders approved a buy-out offer for the company from Tsinghua Unigroup. Spreadtrum first announced an offer in May, and Unigroup later raised its price in June to $31 (HK$240) per share, representing a 40 per cent premium over Spreadtrum's price before the offer was announced.