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Shares in China’s Xiaomi dip on Hong Kong debut
HONG KONG, July 9, 2018 (BSS/AFP) – Chinese smartphone giant Xiaomi fell on
its Hong Kong stock debut Monday, following a long-awaited initial public
offering overshadowed by China-US trade tensions and falling global markets.
Even before public trading started confidence was low, with investors
selling at a discount on the unofficial “grey market” last week, Bloomberg
News reported.
And on Monday it ended down 1.18 percent at HK$16.80, though that was much
better than in mid-morning trade, when it was briefly down almost six
percent.
Despite being one of the most anticipated Chinese technology IPOs this
year, Xiaomi saw a disappointing valuation of US$54 billion, well below its
ambitious US$100 billion target.
Founded in 2010 by entrepreneur Lei Jun, Xiaomi has grown from a start-up
in Zhongguancun — China’s “Silicon Valley” — to become the world’s fourth-
biggest smartphone vendor at the end of last year, according to International
Data Corp.
Lei has described Xiaomi as a “new species” of company with what he
describes as a “triathlon” business model combining hardware, internet and e-
commerce services. Its products range from smart home gadgets like air
purifiers to non-tech items such as pillows and ballpoint pens.
A delay in Xiaomi’s plan to launch new so-called Chinese Depository
Receipts (CDRs) in Shanghai as well as doubts about the sustainability of its
business model were also among reasons for the lower valuation, analysts
said.
Chinese authorities devised the CDR programme, under which homegrown
companies listed abroad can simultaneously list at home, after watching
technology heavyweights Alibaba and Baidu launch on Wall Street.
The plan aims to help development of China’s still relatively immature and
volatile share markets and allow domestic investors to invest in the
country’s big tech champions.
Beijing-based Xiaomi is the first firm in Hong Kong to trade with a
controversial dual-class structure since listing rules were overhauled to
allow weighted voting rights for different sets of shareholders.
Analysts say Hong Kong’s technology listings have struggled in recent
months, deflating investor interest, while escalating trade tensions have
made it a bad time to launch an IPO.
“Nothing can help because the sentiment is no good at the moment… Most of
the IPOs listed this year were not that profitable,” said Dickie Wong of
Kingston Securities, adding he does not see any “upsides” until the CDR
listing, which would boost interest.
But Mo Jia of Canalys said the IPO was a “must-go for them even though the
current situation is not positive”, as Xiaomi would need the cash for an
ongoing global expansion as it looks to broaden its scope outside the
saturated Chinese smartphone market.
And Jackson Wong, at Huarong International Securities, warned there could
be repercussions for Hong Kong’s IPO outlook, saying a tepid start for Xiaomi
would suggest a weak appetite for new listings in the city.
“That would definitely make (other firms looking to list) look for other
markets such as New York,” he added.
BSS/AFP/HR/1450