Xiaomi's Weak Debut Portends Trouble For Imminent Hong Kong Tech Listings

Yolanda Curtis
July 11, 2018

During the day prices slipped to as low as HK$16 ($2.04) but managed to climb to HK$16.80 ($2.14) by closing time.

Xiaomi first announced it was going public on May 3 and hoped to raise $10 billion Dollars to get to a total valuation of $100 million. One estimation says that after paying fees and expenses, Xiaomi has raised about HK$23.97 billion ($3.05 billion). One of the reasons that could be behind the lukewarm response is said to be Xiaomi's backstory before the listing which didn't go down well with the retail investors.

Compared to Apple's initial public offering way back in 1980, however, Xiaomi's IPO has not been a resounding success.

By contrast, China Literature Ltd, the e-book arm of Tencent Holdings, late past year raised $1.1 billion in its Hong Kong IPO amid heavy demand, with the retail portion being 625 times oversubscribed.

Shares of some other tech-related companies that floated recently have been weak in Hong Kong.

XIAOMI'S debut is off to a bad start even before its shares officially begin trading in Hong Kong on Monday. "I believe that in the future, there will be more high-quality internet companies coming to Hong Kong".

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.

Let us know in the comments if you think Xiaomi will do well in the medium and long term in terms of its stock price.

Typically companies are valued on a multiple of profits or sales.

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

Xiaomi's disappointing offering touted as the biggest tech listing since 2014 and it's unclear how it will affect other high-flying technology firms Hong Kong hopes to line up.

Potential investors also struggled to view the company as the internet play it considers itself to be, rather than as a smartphone maker - the lower-margin business that now generates most of its profits, sources said.

"We are an internet company and from Day 1 we have set up a weighted voting rights structure with dual-class shares", he added.

Founded in 2010 by entrepreneur Lei Jun (雷軍), Xiaomi has grown from a start-up in Zhongguancun - China's "Silicon Valley" - to become the world's fourth-biggest smartphone vendor at the end of previous year, International Data Corp said.

Xiaomi is the biggest smartphone seller in India and is making inroads in Europe.

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