Xiaomi cuts valuation: Sources

Sources say Xiaomi is using a range of US$55 billion (S$75 billion) to US$70 billion in its discussions with potential investors. The new valuation is far below the US$100 billion touted by sources earlier this year.
Sources say Xiaomi is using a range of US$55 billion (S$75 billion) to US$70 billion in its discussions with potential investors. The new valuation is far below the US$100 billion touted by sources earlier this year.PHOTO: REUTERS

This follows delay in China share listing, but Hong Kong IPO expected to go ahead this week

HONG KONG • Chinese smartphone maker Xiaomi has lowered its likely valuation to between US$55 billion (S$75 billion) and US$70 billion following its decision to delay its mainland share offering until after its Hong Kong initial public offering (IPO), three sources with direct knowledge of the matter said.

The delay was triggered by a dispute between the company and regulators over the valuation of its China Depositary Receipts (CDRs), sources said, casting doubt on Beijing's efforts to lure foreign-listed Chinese tech giants back home.

Xiaomi Corp is using a range of US$55 billion to US$70 billion in its discussions with potential cornerstone investors ahead of the planned launch of its Hong Kong IPO later this week, the sources said.

The sources declined to be named because the discussions were not public.

Xiaomi did not immediately respond to a request for comment on the valuation.

The new valuation is far below the US$100 billion touted by sources earlier this year, and below the more recent floor price of US$70 billion that the company and its advisers had informally used as guidance for investors.

Pre-IPO research from its sponsoring banks valued the group at between US$65 billion and US$86 billion, Thomson Reuters' IFR reported last week.

Xiaomi said it was asking regulators to postpone its application to sell CDRs, but gave no reason for the decision.

"After iterative, careful research, the company has decided to implement its Hong Kong and mainland IPO in a measured way," Xiaomi said in a post on its Weibo account.

"We'll list in Hong Kong first, before going public on the mainland through the CDR."

Beijing-based, Cayman-domiciled Xiaomi had been expected to raise up to US$10 billion, split between its Hong Kong and mainland offerings in one of the biggest tech floats worldwide in recent years.

Two sources said it was looking to sell about 10 per cent of its enlarged capital in the Hong Kong offering.

The delay is a blow for Chinese officials, who have designed the offerings as a means for China to compete globally for major tech listings and give mainland investors access to its tech champions.

Other companies known to be considering CDRs include Alibaba, search engine Baidu and JD.com, Alibaba's e-commerce rival.

In Xiaomi's case, China Securities Regulatory Commission officials wanted the CDRs to be priced below the level the company was targeting, according to two sources.

Xiaomi is still expected to go ahead with its Hong Kong listing, which it plans to kick off later this week. The exact size of the Hong Kong deal is not yet clear, said the sources.

REUTERS

A version of this article appeared in the print edition of The Straits Times on June 20, 2018, with the headline 'Xiaomi cuts valuation: Sources'. Print Edition | Subscribe