As Chinese online giant Alibaba delivered the world’s biggest initial public offering (IPO), MSCI, a provider of investment decision support tools, has warned that governance and security at the firm could impact on future value.
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The IPO is expected to raise at least $21.8 billion (£13.3bn) after shares were listed on the New York Stock Exchange at $68 (£41). Report suggests that more shares in the company could be sold.
However, despite the interest from investors, responsible investors should consider issues within the company’s governance structure and privacy concerns, states MSCI.
MSCI explains, “Alibaba’s public shareholders can expect to have little influence over the group’s future strategy, as its board is controlled by a partnership comprised of company executives and insiders that on listing will control 44% board seats, and could control up to 55% at a future date. On listing, 56% of the board will be compromised of insiders.”
The organisation adds that impairment of shareholder rights is compounded by key assets being held in a Variable Interest Entity structure of “questionable long-term legitimacy, evidence of potentially conflicted related party transactions, and takeover defence arrangements”.
MSCI also noted that Alibaba’a weak privacy and data security controls and its need to cooperate with the Chinese government in internet censorship activities may hinder its future international expansion.
As a result, the organisation states that these “core problems” could impact on future value. Alibaba received an MSCI ESG IVA rating of ‘B’ and an MSCI ESG GovernanceMetrics ranking in the first percentile, ranking the firm as worst in class.
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