How Jack Ma can keep a tight grip on Alibaba after an IPO By Olivia Oran and Alexei Oreskovic NEW YORK/SAN FRANCISCO (Reuters) - Alibaba Group Holding Ltd founder Jack Ma wants to keep a tight grip on the Chinese e-commerce company he founded even after he takes it public, and U.S. law gives him several ways to do so. The company had planned to list in Hong Kong, but the exchange there threw cold water on Ma's plan to give Alibaba's insiders, who only own about 10 percent of the stock, the power to nominate a majority of the board, sources say. Regulators in the Chinese territory said that all shareholders must be treated equally. A source close to the company told Reuters that Alibaba, now effectively controlled by a group of 28 "partners" including Ma, senior executives and other insiders, is intent on keeping a similar structure when it goes public. Listing in the U.S. makes that possible, a key consideration in choosing New York over Hong Kong, the source said. Alibaba, which some analysts estimate to be worth up to $120 billion, is the most anticipated Internet IPO since Facebook's $16 billion offering last year. The loss of the share sale, which bankers have estimate will be worth more than $15 billion, is a blow to the Hong Kong exchange, as the listing would have added to its clout and trading volume. Keeping a tight rein on its operations may be one way for Alibaba's founders and top management to prevent the company from becoming victim of short-term market demands in a business that requires constant innovation and capital investments, the source said. Facebook Inc and Google Inc have made similar choices. But while many U.S. companies, including Facebook and Google, use a dual-class stock structure to keep power within the hands of the companies' founders, Alibaba is likely to pursue a different approach, the source said. The source did not elaborate. But several corporate lawyers, while noting that they had no direct knowledge of the company's plans, said that one likely route for the 28 partners would be to list Alibaba by effectively creating a new partner that would become the publicly traded company. Setting up the corporation that way - known as an "Up-C corporation," or umbrella partnership - can give the original partners much stronger voting rights, lawyers said. While Japan's Softbank Corp, which owns 35 percent of Alibaba, and Internet company Yahoo, with 24 percent, each have a seat on Alibaba's four-person board of directors, neither company is represented among the 28 partners. In fact, there are no outside investors in the partners' group. The partners' powers may increase after the IPO as it gains control of an expanded board of directors. Yahoo will lose its board seat when it sells half its stake in Alibaba in the IPO. Under the structure the company envisions, Alibaba's shareholders would still have the ability to approve or reject all the directors. But the structure would prevent an activist investor from ever taking control of the board by nominating a majority of directors. While relatively rare, companies that have employed the Up-C structure include investment bank Evercore Partners Inc, payment processor Vantiv Inc and online foreign exchange provider FXCM Inc. Some corporate governance experts say that Alibaba's desire to maintain its partnership structure could create friction with investors. "Short-term oriented retail investors may place very little value on voting, but longer-term institutional investors will put more weight on it," said Jason Schloetzer, an assistant professor at Georgetown University's McDonough School of Business. But some institutional investors note that they have been willing to buy shares with weaker voting rights in the past, particularly at companies with a dual class shareholding structure. For example, Facebook CEO Mark Zuckerberg has almost complete control of the social media company through a dual share structure. "Our view is that if we don't like something management is doing, we can always sell," said Dave Stepherson, chief investment officer at Hardesty Capital Management in Baltimore. "The voting issue is a little silly because most investors don't vote," Stepherson added. Reporting by Olivia Oran in New York and Alexei Oreskovic in San Francisco; Editing by Martin Howell