Luna, Joyce Anne R.

September 20, 2021

BSA 701

CASE ANALYSIS

1. Dual class share is when a company issues two share classes. It can consist of
Class A and Class B shares, for example. These shares can differ in terms of
voting rights and dividend payments. When multiple share classes of stock are
issued, typically one class is offered to the general public, while the other is offered
to company founders, executives, and family. The class offered to the general
public often has limited or no voting rights, while the class available to founders
and executives has more voting power and often provides for majority control of
the company.
In terms of voting rights, the dual class share system is similar to Alibaba's 28-man
partnership system, where one class has more voting rights than the others,
allowing the company's founder to keep control and power within the company.
Furthermore, the dual-class share structure was created to allow the company's
founders and present leaders to think long term rather than be at the whim of short-
term investors looking to make the most money immediately away. Similarly,
Alibaba's 28-man partnership structure is designed to retain the business's
innovative culture even if the original founders leave, ensuring the corporation of
a long-term strategic goal rather than myopic or short-term gains.
Alibaba's partnership system, in our opinion, does not increase stakeholders’ value
since, when we say stakeholders’ value, we mean achieving the optimum level of
return for all stakeholders in a company. It normally does not focus solely on
maximizing net profits or cash flows, but also takes into account other stakeholder
demands such as being elected to the board of directors or having a position in
key management. However, in Alibaba's partnership system, those other needs of
stakeholders are not taken into account; instead, shareholders are only allowed to
vote for or against a nomination based on their shareholdings. As a result, we
believe Alibaba is not maximizing the value of all shareholders, particularly the
outsider one. Regardless of how stock ownership grows in the future, outside
shareholders will not be adequately represented on the board. Let's take the
scenario of Yahoo Inc. and Softbank Corporation, who own 24 percent and 37
percent of the company, respectively. When we consider their stock ownership,
we may expect them to have some representation on the board of directors and in
the company's most significant decisions, but they don't. As a result, stakeholder
value would decrease.
2. Alibaba’s partnership structure has the purpose of ensuring that the company is
operated by a group of people who are passionate about the company and are
 mission-driven. This aim alone can be the reason why Yahoo! and Softbank are
willing to approve the 28-man partnership structure for this structure as long-term
strategies that can ensure the rapid growth of the company in the long run. Also,
this structure and view is supported by Joe Tsai who believes that the partnership
structure helps to preserve the company’s innovative culture even if the initial
founders leave the company, assuring the company of long-term strategic goals
instead of short-term gains.
3. Many businesses opt for a dual-class share structure. This structure is appropriate
for a digital business since it demonstrates how to acquire public funds while
maintaining control. In addition, the approach allows investors to work side by side
with innovators and high-growth enterprises, reaping the financial benefits of these
businesses' long-term success. Facebook, Zynga, Groupon, Snapchat, and
Alibaba are examples of companies with a dual-class share structure. Google's
stock structure is one of the most well-known examples of a dual/multiple class
stock structure (a subsidiary of Alphabet Inc.). The large search engine claimed a
market capitalization ranking in the top 30 around the world when it conducted its
first public offering (IPO) in 2004.
4. Based on our opinion, HKEs has a point on why they reject Alibaba. They justified
their reason when they told Alibaba that they are just considering the possible
future loss of generation of companies from China’s new economy if they decide
to revise their rules and regulations. However, with the growth that Alibaba is
achieving now as the time passes by, we also think that HKEx has made a mistake
in rejecting Alibaba. Alibaba is now a successful company even with their listing
proposal that was the mere reason why HKEx rejected the said business. If HKEx
just amended their rules and regulations and considered Alibaba, maybe Alibaba
can make a big impact to their economy.
5. In our opinion, allowing dual-class share businesses to be listed in Singapore as a
dual-class share structure is a good idea. To increase the number of public funding
possibilities available and to promote the SGX as a home for high-tech,
biopharmaceutical, and life science companies. We believe that the best
precaution in this circumstance is for them to impose a maximum vote limit. We
believe that in this case, the appropriate safeguard is to set a maximum voting gap
of 10.1 between shares with multiple voting rights and ordinary shares, and that
existing companies would not be able to convert to a dual class share arrangement
because their owners did not invest with an understanding of the risks associated
with those structures.