Why New Yorkers could pay for acceding to Alibaba's 'Open sesame'
Strategy of pursuing top spot, exemplified by prized Alibaba IPO, could prove short-sighted
To understand why New York capturing the title of world's greatest financial centre is no cause for celebration, look no further than the Alibaba IPO.
The Chinese e-commerce company announced its intention to list its shares in the US rather than Hong Kong, a decision driven in significant part by regulatory arbitrage, just hours after the Big Apple captured the top spot for the first time in a survey of global financial capitals.
The battle to be top financial centre is a bit like hosting the Olympics: the winner always loses, but the athletes (or bankers) do well out of the deal.
New York topped London for the first time in a ranking of financial centres, according to the Global Financial Centres Index compiled by London-based consultancy Z/Yen, with Hong Kong, which lost out on the Alibaba IPO, in third place.
While clearly New York offers deep capital markets and expertise, it seems one point was key in taking Alibaba halfway around the world to list its shares: Hong Kong would not countenance its executive-serving corporate structure.
At issue is a provision that will allow a small group of Alibaba insiders to retain the right to appoint the board despite owning a small minority of shares, a structure permitted in the US but not by Hong Kong.
