Employees work at Alibaba headquarters in Zhejiang Province . The Chinese e-commerce giant's purchase of a stake in Citic 21CN has prompted speculation that Alibaba might use the unprofitable information service company to go public. Dow Jones/ Beijing Alibaba has invested in many businesses, but its latest, a purchase of a stake in a Hong Kong -listed company, has prompted speculation that the privately held e-commerce giant might use the unprofitable information service company to go public. But investors hoping that China's biggest e-commerce company gets a Hong Kong listing presence through its acquisition of Citic 21CN Co are likely to be disappointed. On Thursday, Citic 21CN , a company whose businesses include managing bar codes that keep track of drugs in China , said that Alibaba and Yunfeng Capital , a private-equity firm set up by Alibaba founder Jack Ma , were buying 54.3% of the company for $170mn . The move lifted the shares of Citic 21CN , a Hong Kong -listed affiliate of Chinese government-controlled conglomerate Citic Group , fourfold to its highest in over a decade. CMB strategist Daniel So said that market players are speculating whether Alibaba could move assets into Citic 21CN as a way to go public at a time when the e-commerce firm's preparations for its own initial public offering are taking longer than expected. Citic 21CN's market value surged HK$11.49bn ( US$1.5bn ) on Friday to HK$14.57bn . But to achieve a backdoor listing through asset injections, Alibaba would have to overcome similar hurdles to an ordinary IPO through the front door. Under Hong Kong's rules, a substantial asset injection within two years after a takeover of a listed company is considered a reverse takeover, which is vetted by the stock exchange as if it were an IPO, requiring all the regulatory approvals. In recent years Hong Kong has seen some reverse takeovers by Chinese property developers like China Vanke . But Alibaba's assets are likely far too big to be absorbed by Citic 21CN , which recorded revenue of just US$1.9mn and almost the same amount in net loss in the first half of last year. In Alibaba's IPO talks with the Hong Kong Stock Exchange last year, a major sticking point was the company's commitment to a so-called partnership structure. Alibaba wants to keep its partnership structure that allows its partners-including company founder Jack Ma and some other senior executives-to nominate more than half of the board directors even though the partners' combined stake in the company is only about 10%. Last year's IPO discussions fell apart because the two sides didn't agree on this structure, according to people familiar with the matter. Citic 21CN can't have that structure either, unless Hong Kong changes its mind, in which case Alibaba could just launch an ordinary IPO on its own. On Friday, a person familiar with Alibaba's thinking said that the Citic 21CN deal "has nothing to do with any plans to go public." The person also said that Alibaba is determined to keep its partnership structure no matter where it lists. The Hong Kong Stock Exchange , meanwhile, is set to launch a public debate on whether it should allow a wider range of shareholding structures for IPOs, according to people familiar with the matter, opening up the possibility of the city allowing the partnership structure Alibaba is seeking.
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