Three-day rout wipes $8.5b off Xiaomi stock

Billions of Xiaomi shares have been unlocked for sale after the six-month lockup period that followed the company's debut expired.
Billions of Xiaomi shares have been unlocked for sale after the six-month lockup period that followed the company's debut expired.PHOTO: REUTERS

HONG KONG (BLOOMBERG) - Xiaomi Corp's bad week got worse on Thursday (Jan 10) as more investors rushed to sell as soon as they could.

The stock fell 4.1 per cent as of the midday break in Hong Kong, taking its three-day decline to 17 per cent, or US$6.3 billion (S$8.5 billion) in market value. Analysts at Goldman Sachs Group and China International Capital Corp were the latest to cut their price targets on the Chinese smartphone maker, joining at least five others who have tempered their estimates just this week.

Billions of Xiaomi shares have been unlocked for sale after the six-month lockup period that followed the company's debut expired. That's enabled many shareholders, who could only watch as the stock shed US$14 billion in market value, to finally join the selling. A flurry of off-exchange block trades showed that some have taken the opportunity to offload the stock, even though Xiaomi is nowhere near its HK$17 listing price.

That may be because shareholders who have owned a piece of Xiaomi since the company's earlier funding rounds can actually pocket in a significant profit by selling their unlocked stock. Some 3.9 billion shares bought in a 2010 Series A round of funding cost about two Hong Kong cents each, while another 2.2 billion bought in the same year cost about nine Hong Kong cents apiece, according to data compiled by Sinolink Securities Co.

Analysts have been trimming their profit and sales forecasts for Xiaomi, blaming China's slowing smartphone market and intensifying competition from rivals like Huawei Technologies Co. Xiaomi was one of the most hyped initial public offerings of 2018, with bankers initially touting a valuation of as much as US$100 billion. The company's market capitalisation has dropped to about US$30 billion.