Xiaomi IPO likely to raise far less than expected

Xiaomi is offering 2.18 billion shares at HK$17 to HK$22 apiece, which values it at US$53.9 billion to US$69.8 billion. The Chinese firm has put off launching new Chinese Depository Receipts in Shanghai.
Xiaomi is offering 2.18 billion shares at HK$17 to HK$22 apiece, which values it at US$53.9 billion to US$69.8 billion. The Chinese firm has put off launching new Chinese Depository Receipts in Shanghai.PHOTO: REUTERS

Smartphone maker had hoped for $13.6b in HK share sale, but views of its business model mixed

HONG KONG • Chinese smartphone maker Xiaomi kicked off its initial public offering yesterday but the firm is likely to pull in about US$6.1 billion (S$8.5 billion), far less than originally expected, with investors having mixed views about its main business.

Xiaomi had hoped to raise US$10 billion with the Hong Kong IPO, making it the biggest since Alibaba's US$25 billion New York debut in 2014 and valuing the company at about US$100 billion.

However, the firm is offering 2.18 billion shares at HK$17 to HK$22 apiece, according to Bloomberg News, which values it at US$53.9 billion to US$69.8 billion.

Xiaomi had hoped to be the first company to list shares in Hong Kong at the same time as launching new Chinese Depository Receipts (CDRs) in Shanghai under new rules announced in April by mainland authorities to open up markets in the world's number two economy.

But on Tuesday it put off its decision on listing the CDRs until it completes its IPO in Hong Kong. The China Securities Regulatory Commission said it has cancelled a listing review originally slated for June 19.

This delay, as well as differing market views about Xiaomi's business model, were also among reasons for the lower valuation.

CEO Lei Jun claimed it was an Internet services company making money via online games and advertisements despite 70 per cent of its revenues coming from selling hardware, particularly smartphones.

The firm, which mainly sells cheap but high-quality smartphones in China, is looking to push into Europe - recently opening its first flagship store in Paris - as the home market reaches saturation point.

China Mobile and US wireless-chip giant Qualcomm are among the cornerstone investors and it is expected to list on July 9.

Chinese authorities devised the CDR programme, under which home-grown companies listed abroad can simultaneously list at home, after watching technology heavyweights Alibaba and Baidu list on Wall Street.

The objectives of the plan include helping to develop China's still relatively immature and volatile share markets while allowing domestic investors to invest in the country's big tech champions.

Alibaba and Hong Kong-listed Tencent have expressed an interest in the plan.

Xiaomi shipped 28 million smartphones worldwide from January to March, an 88 per cent surge year on year, and the fourth largest amount in the world, after Samsung, Apple and China's Huawei, according to figures from the International Data Corporation.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on June 22, 2018, with the headline 'Xiaomi IPO likely to raise far less than expected'. Print Edition | Subscribe