The collapse of negotiations for Alibaba's listing in Hong Kong, which sees the lucrative initial public offering set to head to New York, has prompted sharp criticism of the city's stock exchange from the Chinese online trading giant and some investors.
Talks between the Hong Kong bourse and Alibaba, looking at ways to grant founder Jack Ma and its senior management some control over the board of directors, ended in vain, according to a blog post by Alibaba's co-founder Joe Tsai on Thursday.
In a scathing attack on the exchange's regulators, he warned that the world's largest companies would "pass by" Hong Kong unless its bourse was more willing to be flexible.
"We firmly believe that Hong Kong must consider what is needed in order to adapt to future trends and changes," Tsai said on his blog.
"The question Hong Kong must address is whether it is ready to look forward as the rest of the world passes it by."
Others welcomed the move as a sign the Hong Kong stock exchange was willing to stick by its own rules despite the potential size of the listing.
Hong Kong's loss will likely be New York's gain. Dow Jones Newswires, quoting a source, said Wednesday the company now plans to list in the American city, has already hired a US law firm to work on an IPO there and would likely hire banks soon.
The company's stock market listing is expected to raise about $10 billion, which would make it the technology industry's largest IPO since Facebook's offering last year.
Tanrich Securities vice president Jackson Wong believes Hong Kong is losing out from an investor's perspective.
"We really would like to see a giant Internet stock from China to be listed in Hong Kong, rather than in New York," Wong told AFP, describing any listing by the company to be a "blockbuster IPO".
"When investors are in the stock market, they want to make money and to buy some quality stocks and Alibaba is one of the two big Internet companies."
The initial impact on the city's stock exchange could be huge with a boost to its daily turnover in the long run, Wong said, without providing any figures.
According to Wong, Alibaba would trade in a similar way to Chinese Internet giant Tencent, which adds around two percent to the daily turnover for the Hong Kong Stock Exchange (HKex).
Hong Kong's bourse does not allow companies to issue two types of shares which give founders and management a greater voting weight compared to minority shareholders.
The dual-class share structure is a preferred method for US technology companies such as Facebook and Google and is offered in the US.
An "unfair" structure
But some analysts were unfazed about the potential loss of Alibaba's listing in the southern Chinese city, and applauded its regulatory bodies for turning the listing down, despite its size.
"Hong Kong is in a better position because if you grant special treatment to one company, what if another company comes up and says we want special treatment too?" Geo Securities Chief Executive Officer Francis Lun told AFP.
Abuse in a dual-class share system could occur when minority shareholders who own the bulk of company's shares cannot make a significant impact when a smaller amount of shares owned by the company's senior management has more weight.
"We don't want something that is so blatantly unfair to the investors," Lun said.
In an editorial on Saturday, the South China Morning Post said the stock exchange was "right not to make an exception for Alibaba".
"The one share, one vote principle is not to be abandoned lightly," the paper wrote.
But the editorial added that some debate over reform of the bourse was needed.
"The controversy has thrown open the question whether our listing rules are in line with the times. Regulators and the government should encourage the debate," it said.
The highly-anticipated relisting of the e-commerce giant, which privatised in 2012, and the collapse of talks between the Hangzhou-headquartered firm and Hong Kong authorities led to a clash of ideologies between company executives and the authorities.
Charles Li, the chief executive of HKex, said Wednesday that he defended public interest against the rights of certain company shareholders in a lengthy and unusual blog post about a dream he recently had.
Without directly commenting on the technology company, Li said: "As enshrined in our charter, in the event of a conflict, public interest is put ahead of shareholder interest at HKEx."
But Alibaba's Tsai defended the company's structure and said they didn't propose a dual-class share system.
"We proposed a governance structure that would enable Alibaba’s partners – key people who manage our businesses – to set the company’s strategic course without being influenced by the fluctuating attitudes of the capital markets," he wrote.
Losing the coveted deal could hamper the city's efforts to maintain its appeal as the destination for public listing, after being eclipsed by other bourses since 2012 as the world's IPO venue.
Hong Kong's bourse was one of the world's top IPO venues from 2009 to 2011, but took a hit after Chinese companies became worried about slow economic growth last year.
Hong Kong stock exchange refused to confirm that talks between the two have broken down.