So long, for now

By V.V.V. | HONG KONG

SHAREHOLDERS can be such nuisances. This week the Alibaba group, China's biggest internet firm, announced that it wants to delist the shares of Alibaba.com, its business-to-business arm, that are traded on the Hong Kong stock exchange. The company, and its founder and chairman, Jack Ma (pictured), made no attempt to sugar-coat the decision.

One big motivation for delisting, the parent company said, is to have the freedom to run its offshoot “free from the pressure of market expectations, earnings visibility and share price fluctuations.” It also admitted that its slumping share price had been causing problems inside the company: “A depressed share price may continue to adversely impact employee morale,” it said.

The deal, which will set Alibaba back $2.3 billion, looks likely to succeed. One reason to think so is the hefty premium on offer. A bit over a quarter of Alibaba.com's shares are publicly traded, and the firm is offering those unhappy shareholders HK$13.50 ($1.74) per share. That matches the offer price of the firm's initial public offering in 2007, and is roughly 46% higher than the last closing price two weeks ago, when trading in the firm's shares were halted.

Another reason for shareholders to cash in may be that the division's immediate commercial prospects look dim. The web portal is still recovering from a corruption scandal and has endured a backlash among users who are unhappy with recent changes to the way the site works. Jinkyu Yoon of Nomura, a stockbroker, adds that Alibaba.com's core business model—charging small and medium-sized Chinese sellers a fee to be connected with buyers at home and abroad—is also under attack from big search engines like Google and a Chinese equivalent, Baidu.

Mr Ma argues that the delisting will give the group the space it needs to work out a new strategy for Alibaba.com, which will require investments that may reduce short-term returns. His managers have been shifting the division's focus from expanding the number of paying vendors to curating a site with better quality and service. Such an approach, if it works, may be the best defence against commoditisation and the erosion of margins by competitors like the big search engines.

Still, there may also be other motives behind this week's move. Yahoo! and Alibaba have tried to agree terms that would allow the Chinese firm to acquire the big stake in its parent group held by the American search firm, but those talks recently fell apart. Some investors wonder if the delisting will somehow make it easier for Mr Ma to buy back that stake. Others speculate that it is a first step towards a flotation of the whole Alibaba group.

The firm this week splashed cold water on both rumours. This “privatisation,” as delisting is called in Hong Kong, is strictly about sorting out Alibaba.com's strategy, it insisted. Perhaps so, but punters keen to bet on China's internet future will surely be watching Mr Ma's moves closely.