Xiaomi IPO: Smartphone maker's stock set to drop in debut

Joanna Estrada
July 9, 2018

Xiaomi priced its Hong Kong initial public offering (IPO) at HK$17 per share, the bottom of an indicative range, raising $4.72 billion in the world's biggest technology float in four years. The spat pushed Hong Kong's benchmark index to a nine-month low last week.

Lei Jun (center), Xiaomi's CEO with senior vice president Li Wanqiang (left) and executive director Lin Bin (right) ahead of the company's IPO.

Despite Xiaomi's challenging debut, Reuters notes that Hang Seng - the Hong Kong stock market index - was 1.7 percent higher.

The Sino-US trade dispute has roiled financial markets including stocks and currencies, and the global trading of commodities from soybeans to coal over the past several weeks.

"Although the macroeconomic conditions are far from ideal, we believe a great company can still rise to the challenge and distinguish itself", he said in a speech at the listing ceremony.

"Investors are skeptical about Xiaomi's growth momentum as the global smartphone market seems to be on a downward slope", said Jacky Zhang, an analyst at BOC International in Shanghai. "The way ZTE got very severely pummeled in the United States. that's certainly also had impact", he added.

Typically companies are valued on a multiple of profits or sales.

Chinese smartphone giant Xiaomi has listed in Hong Kong for $4.7bn (£3.5bn), around half the amount the company had said it hoped to raise in a lacklustre listing.

Xiaomi argued that it should receive a higher valuation than other hardware makers because of the internet services - such as music and video streaming apps - it offers with its devices.

Xiaomi's float was the first under the city's new rules allowing firms to weight voting rights in favor of company founders, as part of efforts to encourage more tech groups to choose Hong Kong over NY, its arch-rival.

Its main business is phones, but it also sells a range of other internet-connected devices, including scooters and even smart rice cookers.

It is now the biggest smartphone vendor in India and is pushing into European markets including Spain and Russian Federation, though it has lost share in China recently to lower-cost rivals.

Other reports by Click Lancashire

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