Xiaomi IPO draws bids at discount in grey market

A Xiaomi store in Beijing. Xiaomi is the first in Hong Kong to sell shares with a dual-class structure since the city changed its rules to allow founders to keep outsized voting rights, although that means the stock won't be included in MSCI's global
A Xiaomi store in Beijing. Xiaomi is the first in Hong Kong to sell shares with a dual-class structure since the city changed its rules to allow founders to keep outsized voting rights, although that means the stock won't be included in MSCI's global benchmarks.PHOTO: REUTERS

LONDON • Xiaomi Corp's debut is off to a bad start even before its shares officially start trading in Hong Kong on Monday.

Some institutional investors saw bids as low as HK$15.40 (S$2.68) yesterday with no offers in grey-market trading, according to three people familiar with the matter. That is 9.4 per cent below the issue price.

Others said the level was at HK$16.15 - a drop of 5 per cent - though there were no firm offers either, according to Mr Andrew Jackson, head of Japanese equities at Soochow CSSD Capital Markets in Singapore.

Xiaomi priced its initial public offering (IPO) at the bottom end of a range, cutting its valuation to about US$54 billion (S$73.6 billion), roughly half of the smartphone maker's initial goal. The firm also scrapped a plan to sell shares on mainland China after failing to satisfy regulators.

Xiaomi priced its IPO at the bottom end of a range, cutting its valuation to about US$54 billion (S$73.6 billion), roughly half of the smartphone maker's initial goal. The firm also scrapped a plan to sell shares on mainland China after failing to satisfy regulators.

The debut comes as investors abandon Hong Kong equities amid concern over a US-China trade war.

Traders will be able to bet on further declines by shorting the stock on its first day of trading, according to the Hong Kong exchange operator. The company is the first in Hong Kong to sell shares with a dual-class structure since the city changed its rules to allow founders to keep outsized voting rights, although that means the stock won't be included in MSCI's global benchmarks.

After a sizzling 2017, Hong Kong's tech listings have started to struggle.

Ping An Healthcare & Technology's May debut flopped after the retail tranche was 600 times oversubscribed. Razer, a maker of gaming laptops and accessories, and online car-financing provider Yixin Group trade at more than 50 per cent below their November issue prices.

Retail investors failed to show much interest in Xiaomi despite the hype, but those who bought into the IPO may be able to flip their shares from today. Phillip Securities Group typically begins operating a grey market one trading day before the debut.

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A version of this article appeared in the print edition of The Straits Times on July 06, 2018, with the headline 'Xiaomi IPO draws bids at discount in grey market'. Print Edition | Subscribe