Asian Corporate Governance Association (ACGA)
“ACGA Survey on Alibaba and Non-standard
Shareholding Structures in Hong Kong”
Press Conference
Tuesday, April 15, 2014
12.00pm - 1.30pm
CLSA Hong Kong Office
Pacific Place, Hong Kong
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Asian Corporate Governance Association
ACGA is
the only
regional
non-profit
dedicated to
implementing
effective
corporate
governance in
Asia
 The Asian Corporate Governance Association (ACGA) is an independent,
non-profit membership association dedicated to encouraging and facilitating
effective corporate governance improvement in Asia.
 ACGA was incorporated in Hong Kong in 1999 to help members understand
and influence the corporate governance of Asian companies and markets with
a sustainable impact on risk management and long-term value.
 We promote a constructive dialogue between key groups including
institutional investors, companies, regulators and intermediaries.
 ACGA is the pre-eminent provider of expert information and analysis on
corporate governance in Asia and is a major instigator of positive
improvements in corporate governance in the region.
 ACGA now has over 100 members all around the world with a total AUM of
more than US$14 trillion.
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Survey Background

On September 25, 2013, Charles Li, fueled the debate on “non-standard shareholding
structures” in Hong Kong with an article titled, “Voices on investor protection”.

Li’s blog piece followed efforts by Alibaba to explore a possible listing in Hong Kong with
an unusual partnership control structure.

ACGA decided in late 2013 to conduct a survey to gauge the views of our members
from different regions on this issue.

The survey was tested with a group of global institutional investors in November 2013
and formally sent out in December.

Questionnaires were completed during December 2013 and January 2014.
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Key issues
Our survey and research focused on eight key issues:
1.
Investor perceptions of the importance of fair treatment of all shareholders
2.
Investor acceptance of dual classes of shares
3.
Investor acceptance of special partnership structures
4.
The performance of the government and regulators on the Alibaba issue
a) Hong Kong Government
b) Securities and Futures Commission
c) Hong Kong Exchanges and Clearing
5.
Whether it is possible to define an “innovative company”
6.
Whether the Listing Rules should be amended for “innovative companies”
7.
Whether investors would discount Alibaba if it listed with a non-standard shareholding structure
8.
Whether investors would discount the Hong Kong market generally if listings with non-standard
shareholding structures became common
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Respondents
The 54 respondents comprise a significant group in terms of size and expertise in corporate
governance and regulatory issues. As a group they have:

Combined assets under management (AUM) globally of more than US$14 trillion.

An average AUM per respondent of around US$259 billion, with a range from a few
hundred million dollars to US$4.3 trillion.

Diversified locations, including Asian countries, European countries, North America,
Australia and New Zealand.

About 56% of respondents have their headquarters or offices in Hong Kong.
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Key findings

Overwhelming support for fair treatment of all shareholders and opposition to dual
classes of shares and the proposed Alibaba partnership structure.

Investors would likely apply a significant discount (average of 19%) to Alibaba if it
listed with its special partnership structure.

Investors would also likely apply a significant discount to the Hong Kong market
(average of more than 13%) if non-standard shareholding structures became
common.

HKEx was rated the worst performer among major Hong Kong government and
regulatory authorities in terms of its handling of the Alibaba issue.

Allowing corporate governance exemptions under the Listing Rules for so-called
“innovative companies” sets a bad precedent and will undermine investor protection.
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Question 1
How would you rate the importance of fair treatment of all shareholders in
a market?
Responses:
a.
Very important:
54
(100%)
b.
Important:
0
(0%)
c.
Not important:
0
(0%)
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Question 2
Are you in favour of listed companies having structures with dual classes of
shares with controlling shareholders having more votes than other
shareholders?
Responses:
a. Yes:
0
(0%)
b. No:
53
(98%)
c. Undecided:
1
(2%)
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Question 3
Are you in favour of listed companies having non-standard partnership
structures, with partners representing management retaining the right to
nominate a majority of the board of directors?
Responses:
a. Yes:
0
(0%)
b. No:
51
(94%)
c. Undecided:
3
(6%)
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Question 4
How would you rate the performance of the following Hong Kong
regulators, respectively, in their handling of the Alibaba case? Please
choose "good", "fair", "bad" or "no opinion" for each.
Responses:
Rate
HK Government
SFC
HKEx
Good
2
(4%)
22 (41%)
6
Fair
5
(9%)
8
(14%)
12 (22%)
-
2
(4%)
15 (28%)
22 (41%)
19 (35%)
Fair to bad*
-
Bad
2
(4%)
No opinion
45 (83%)
2
*Two members rated ‘fair to bad’ depends on different further developments of the case.
10
(11%)
(4%)
Question 5
Can you define an "innovative company"?
Responses:
a. Yes:
14
(26%)
b. No:
33
(61%)
c. No opinion:
7
(13%)
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Question 6
Does Hong Kong need to amend its listing rules to allow non-standard
shareholding structures for "innovative companies"?
Responses:
a. Yes:
1
(2%)
b. No:
46
(85%)
c. Don’t Know:
7
(13%)
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Question 7
What discount would you apply to Alibaba if it listed with its special
partnership structure?
Responses:
 A specific discount or discount range*:
20
(37%)
 A discount, but unquantified:
15
(28%)
 Not purchase at all:
3
(6%)
 No discount:
2
(4%)
 No opinion:
14
(25%)
*Average
discount rate is almost 19%, range from 5% to 50%.
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In total, 38 (71%)
Question 8
What discount would you apply to the Hong Kong market if nonstandard shareholding structures became common?
Responses:
 A specific discount or discount range*:
13
(24%)
 A discount, but unquantified:
14
(26%)
In total, 33 (61%)
 A discount on company basis:
4
(7%)
 Not purchase at all:
2
(4%)
 No discount:
4
(7%)
 No opinion:
17
(32%)
*Average
discount value is more than 13%, range from 10% to 25%.
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Contact Details
Jamie Allen
Secretary General
Michael Cheng
Research Director, China & Hong Kong
Asian Corporate Governance Association Ltd
Room 1801, 18th Floor, Wilson House
19-27 Wyndham Street, Central, Hong Kong
Tel: (852) 2160 1789 (D) / 2160 1790 (D)
Fax: (852) 2147 3818
Email: jamie@acga-asia.org; michael@acga-asia.org
Website: www.acga-asia.org
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