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  • Xiaomi stumbles in weak debut US$54 billion IPO values firm at just over half its original target
        Date:2018-07-10 

    Xiaomi Corp made a weak debut in Hong Kong yesterday, with the Chinese smartphone maker's shares ending 1.2 percent lower than its IPO price.

    Investors were selling at a discount on the unofficial gray market last week, Bloomberg News reported, and there was some selling interest at a 5 percent discount.

    Beijing-based Xiaomi is the first firm in Hong Kong to trade with a controversial dual-class structure since listing rules were overhauled to allow weighted voting rights for different sets of shareholders.

    Xiaomi shares closed at HK$16.80, after touching a low of HK$16 in early trade, compared to the initial public offering price of HK$17 per share. The Hang Seng Index ended 1.3 percent higher.

    Hang Seng Indexes Company said Xiaomi meets the fast-entry rule of the Hang Seng Composite Index. Constituent changes will be made to relevant indexes after the market close on July 20.

    Xiaomi Corp will be included in the Hang Seng Composite Index, Hang Seng Global Composite Index and Hang Seng Internet & Information Technology Index, with effect from July 23.

    Xiaomi's IPO valued the firm, which also makes internet-connected home appliances and gadgets, at US$54 billion (HK$424 billion), almost half the US$100 billion it had initially hoped for and below its more recent target of at least US$70 billion.

    At yesterday's closing price the company had a market value of US$53.3 billion.

    The HK$17 price valued the company at 39.6 times its forecast for 2018 earnings, while iPhone maker Apple is trading at 16 times and Chinese social media and gaming giant Tencent Holdings at 36.

    Founded in 2010 by entrepreneur Lei Jun, Xiaomi is described by Lei as a new species of company with what he describes as a triathlon business model combining hardware, internet and e-commerce services. "We are an internet firm," Xiaomi chief executive Lei told the listing ceremony at the Hong Kong Stock Exchange. "From day one, we've set up a dual-class share structure. Without the innovation of Hong Kong's capital markets, we wouldn't get a chance to go public in Hong Kong," he said.

    Asked at the ceremony if the low pricing of Xiaomi and some other tech firms will weigh on upcoming IPOs, Hong Kong stock exchange chief executive Charles Li Xiaojia said it was not up to the exchange to have a view. "The market is always open. It's open to everybody. If you don't like the price, you can stay away."

    Xiaomi sold 2.18 billion shares in its IPO, 1.4 billion of which were new shares. The deal was led by CLSA, Goldman Sachs and Morgan Stanley.

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

    Analysts say Hong Kong's technology listings have struggled in recent months, deflating investor interest, while escalating trade tensions have made it a bad time to launch an IPO.

    "Nothing can help because the sentiment is no good at the moment - most of the IPOs listed this year were not that profitable," said Dickie Wong of Kingston Securities. He does not see any upsides until the CDR listing, which would boost interest.



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