Alibaba Wins Hong Kong Waiver From Shareholder Allocation Rule

Alibaba’s proposed Hong Kong listing of 平頭哥 cleared an exchange hurdle when the Hong Kong Stock Exchange waived the rule requiring an assured shareholder entitlement, while final listing approval remains pending.

The waiver means existing Alibaba shareholders are not assured shares through the proposed transaction. The exchange’s spin-off rules generally require companies to provide existing shareholders an entitlement in the new listing, either through a share distribution or priority access to the offering. The waiver removes that requirement; it does not establish whether Alibaba might make a voluntary allocation.

Alibaba disclosed the waiver on Nov. 10. The company expects 平頭哥 to remain a subsidiary after the listing. 平頭哥 submitted a confidential Form A1 application on Sept. 11 seeking to list H shares on the exchange’s main board, Alibaba said.

The proposed global offering would combine a Hong Kong public offer with a placement to institutional and professional investors. The offering’s size, final structure and the reduction in Alibaba’s stake have not been determined.

Alibaba has described the separation as a way for investors to assess 平頭哥 separately from its other businesses and to attract capital focused on chips. The company also said a listing could give the unit access to stock and bond markets and improve its access to bank financing.

Alibaba sought the waiver, saying an assured entitlement would create complications. It argued that U.S. securities laws would require 平頭哥 to conduct a public offering in the United States and register with the Securities and Exchange Commission (SEC). Alibaba also cited Chinese legal restrictions on pre-offering shares and said the spin-off was not significant relative to its total assets, revenue and net profit.

Remaining steps include Listing Committee approval of the H-share listing, completion of a filing with the China Securities Regulatory Commission (CSRC), and final decisions by Alibaba and 平頭哥. Alibaba said there is no assurance the spin-off will happen or when it might occur.