• Wednesday, February 28, 2024
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Why Alibaba’s switch to a New York listing left Freshfields out in the cold


Alibaba landed on the New York Stock Exchange with an almighty thump last Friday (19 September), becoming the largest initial public offering (IPO) of all time. Its flotation raised $25bn, surpassing the 2010 offering from the Agricultural Bank of China, which raised $22.1bn on its Hong Kong Stock Exchange debut in 2010.

The online retail hub, which was started in founder Jack Ma’s one bedroom apartment in Hangzhou in 1998, now has sales of $420bn – dwarfing Amazon and eBay which had a combined turnover of $90bn in 2013.

It’s no wonder that the law firms involved in the deal pocketed sizeable rewards. According to a company filing with the SEC, Alibaba shelled out $15.8m (£13bn) in legal fees – more than six times the $2.6m firms were paid for Facebook’s controversial IPO back in 2012.

And it was Simpson Thacher that secured the lion’s share of that sum. Sullivan & Cromwell also picked up a chunk for representing the banks. Chinese red circle firm Fangda Partners advised Alibaba on Chinese law, while King & Wood Mallesons provided PRC counsel to the underwriters. Maples and Calder was appointed to advise the issuer on Cayman Islands law. But there’s one firm curiously absent from that line-up – Freshfields Bruckhaus Deringer. The magic circle firm had close ties to Alibaba since it first dipped its toe into global capital markets, with a $1bn IPO on the Hong Kong Stock Exchange in 2007.

This relationship was cemented as Freshfields’ Hong Kong partner Timothy Steinert joined Alibaba as general counsel. In the following years, the firm helped the client to delist from the market in 2012, its $7.1bn buyback of a stake from Yahoo!, and its $7bn debt financing deal in June 2013 (4 October 2013). When the group kickstarted its plan to list on the Hong Kong Stock Exchange earlier this year, Freshfields was its first port of call.

But Freshfields’ fortunes changed. After almost a year of talks in Hong Kong, officials refused to bow to Alibaba’s request to allow a small group of company insiders to nominate the majority of the board. As a result, the group shifted its attention to the New York Stock Exchange, which has a more relaxed attitude to voting – helping Ma to retain his grip on the company.

The move was a huge blow to Hong Kong’s economy, which hasn’t hosted an IPO of more than $4bn since late 2010. And it marked a real loss for Freshfields, which was no longer needed for its Hong Kong legal advice.