Published: Mon, July 09, 2018
IT&Software | By Alfonso Woods

China's Xiaomi: Smart phones, no smart IPO

China's Xiaomi: Smart phones, no smart IPO

Xiaomi, one of the world's biggest smartphone companies, saw its shares slip 6pc in early trading on the Hong Kong Stock Exchange.

Xiaomi's debut is seen as a key test of investor sentiment for what is expected to be a packed second-half of the year for Hong Kong IPOs, with offerings including online food delivery-to-ticketing services platform Meituan Dianping.

Still, the eight-year-old company, which has ambitions to transform itself from a low-priced maker of phones to a global rival to match Apple, managed to raise $4.72bn, making it the world's biggest technology float in four years. "It's open to everybody.If you don't like the price, you can stay away".

The weak pricing values the firm, which also makes internet-connected home appliances and gadgets, at about US$54 billion, nearly half its original US$100 billion ambition earlier this year.

Speaking at the ceremonial opening of trading, Xiaomi's chairman Jun Lei acknowledged that the timing of the IPO might not be optimal given the state of trade friction between the USA and China.

The company, which makes phones to rival Apple's iPhone, had hoped to hit a valuation of $100bn in the float, but is now valued at around $53bn.

Xiaomi has also faced questions from analysts over its ability to increase profit margins in the future, given that much of its smartphone sales are at the lower end of the market. "Xiaomi's self-positioning as an internet company also needs some convincing", he added.

Xiaomi argued that it should receive a higher valuation than other hardware makers because of the internet services - such as music and video streaming apps - it offers with its devices. That is far short of the oversubscription rates for other tech IPOs in Hong Kong.

"We are an internet firm", Xiaomi's founder and chief executive Lei Jun told the listing ceremony at the Hong Kong stock exchange.

Xiaomi sold 2.18 billion shares in its IPO, 1.4 billion of which were new shares.

The company is now the biggest smartphone vendor in India and is pushing into European markets including Spain and Russian Federation, though it has lost share in China recently to lower-cost rivals.

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