Xiaomi sinks after billions of shares are unlocked for sale

HONG KONG • Many Xiaomi investors, who could only watch as the stock shed US$14 billion (S$19 billion) in market value, are now able to join in the selling.

Expiring yesterday was the six-month lock-up period that followed the firm's Hong Kong debut, during which some employees and cornerstone investors were banned from disposing of their allocated shares.

It has been painful: Xiaomi has dropped to HK$10.34 from a listing price of HK$17, losing another 6.9 per cent yesterday on almost seven times its average volume of the past three months.

Over three billion shares were unlocked, equal to about 19 per cent of those outstanding, according to data compiled by Bloomberg.

The lock-up period for controlling shareholders - such as chairman and founder Lei Jun - was extended yesterday for another 365 days, Xiaomi said in a statement. It was previously due to expire in July.

Touted by bankers last year as China's answer to Apple, Beijing-based Xiaomi sought a valuation that would have made it the world's most expensive smartphone maker.

The stock trades at 16 times projected 12-month earnings, less than half its July multiple. It is still 32 per cent more expensive than Apple, which is reeling from its worst quarterly rout in more than a decade.

Xiaomi has dropped to HK$10.34 from a listing price of HK$17, losing another 6.9 per cent yesterday on almost seven times its average volume of the past three months.

To be sure, longer-term investors may want to hold on to Xiaomi's shares rather than dump them at a loss. Analysts still predict Xiaomi will rebound to HK$16.72 on average within the next year.

Hedge funds have been increasing their bearish bets, with almost 30 million shares sold short on Tuesday, the most since August.

Xiaomi attracted the likes of China Mobile and US wireless-chip giant Qualcomm as cornerstone investors last year.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on January 10, 2019, with the headline 'Xiaomi sinks after billions of shares are unlocked for sale'. Print Edition | Subscribe