Dual Class Citizens
While Alibaba's decision to prioritize its partnership and list in the U.S. comes on the heels of a long fight with regulatory bodies in the company's home market, it also comes as activist investors challenge the boards and management of many of the largest companies in Silicon Valley.
Activist investor Carl Icahn spent the better part of 2013 advocating for an expanded share repurchase at Apple (AAPL - Get Report), a campaign the billionaire dropped when CEO Tim Cook decided to buy $14 billion in stock in the wake of the iPhone-maker's disappointing first quarter results.
Icahn also spend much of 2013 contesting a leveraged buyout of PC-maker Dell, and at one point had organized significant shareholder opposition to the takeover deal proposed by founder Michael Dell and private equity firm Silver Lake Partners. Michael Dell and Silver Lake Partners were only able to relent on the buyout when a special committee tasked with the company's sale decided on a last-minute change to the voting standards of the takeover.With fights against Dell and Apple in the rear-view mirror, Icahn has waged an exceedingly scathing campaign against eBay and its current management and board of directors. Other activists have also taken on prominent tech sector heavyweights in the U.S., with some companies not far from Alibaba's purview. Daniel Loeb of Third Point Management waged such a harsh campaign against Yahoo! (YHOO - Get Report) it eventually got the company's CEO fired and led to a complete re-vamp of the Internet pioneer's board of directors. One board member, founder Jerry Yang, understood early-on the promise of Alibaba and made Yahoo! a major investor. While Yang is long gone and Loeb has sold down his stake in Yahoo!, the company continues to benefit from its large minority stake in Alibaba as the company has moved towards an IPO. Yahoo! shares rose over 4% in Monday trading on Alibaba's disclosure it would list its shares in the U.S. Shares in the company closed at $39.11, within reach of five-year highs hit earlier in 2014. Single in Silicon Valley, Dual Class Facebook and Google (GOOG) currently stand out in Silicon Valley as two of the tech companies with a dual class voting standard.
Facebook founder Mark Zuckerberg retains voting control of the company's shares, allowing the maverick CEO to quickly decide upon acquisitions like a $19 billion deal for WhatsApp and a $1 billion purchase of Instagram. Google co-founders Sergey Brin and Larry Page hold a combined voting control of the company's shares. Twitter, Amazon, eBay and Yahoo!, by contrast, have a single standard of stock, which might make those companies more susceptible to activist investors.
Alibaba, depending on how it will seek to give its partnership the ability to nominate a majority of board directors, may represent a middle ground. -- Written by Antoine Gara in New York.