Friday, June 22, 2018

XIAOMI Does IPO in HONG KONG; First Day Performance MIXED

By this point in time it is an accepted fact that Chinese electronics manufacturers not only make nice gadgets that can hold its own against more established international brands, but they’re more affordable to a greater number of consumers as well. Case in point, Beijing-based Xiaomi has entrenched itself in the Asian market with their smartphones that are decently powerful at a fraction of global prices. They have even begun making inroads to Europe with their gadgets, and have made their initial public offering on Hong Kong Thursday. Still, first signs of the IPO are that they have fallen short.
ABS-CBN News reports that Xiaomi’s going public at the Hong Kong Stock Exchange on June 21 was not quite as big as they have estimated. The Chinese smartphone maker had hoped that their IPO could garner upwards of $10 billion, but as the afternoon set in they have only managed $6.1 billion, just a hop over halfway towards their goal. At present, Xiaomi has some 2.18 billion shares to offer interested investors, each worth around HK$17-HK$22. That only puts the company’s value at $53.9-$69.8 billion. To compare, fellow Chinese tech firm Alibaba made its IPO at Wall Street in 2014 for $25 billion, and got a valuation of $100 billion.
The reasons for Xiaomi’s subpar entry into public trading are various. First, despite being known as an electronic gadget manufacturer, the company’s business model is being interpreted differently on the market, and part of that is Xiaomi’s own misstep. Its CEO Lei Jun describes Xiaomi as an internet service brand, and that its primary profits are from online games and advertising, never mind that their smartphones and other hardware now bring in 70% of their revenues. With the Chinese market a pitched battlefield they have expanded abroad, even opening a flagship store in Paris, France.
Another factor in the lackluster Xiaomi IPO was its being entangled in the delays of setting up Chinese Depository Receipts. The CDR system was implemented by the Chinese government, to have China-based companies simultaneously list on the country’s own stock exchange list as when they list abroad. Xiaomi was supposed to time their Hong Kong IPO with the launch of CDRs, but on Tuesday, June 19, they decided to get the HK IPO done first before listing on the CDR. This cancellation was noted by the China Securities Regulatory Commission.
This 2018, Xiaomi ranked the 4th largest worldwide shipper of smartphones, fourth place behind Samsung, Apple and Huawei. From January to March alone they shipped 28 million to all markets they have established thus far.
Image courtesy of Wikimedia Commons


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