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Smartphone maker Xiaomi's weak Hong Kong debut casts shadow on tech listings

11 July, 2018, 12:44 | Author: Tara Roberts
  • Chinese Smartphone Maker Xiaomi Falls in Hong Kong Trading Debut

Aside from global market concerns, investors are said to have been unsure of Xiaomi's ecosystem story.

The first quotation was 16.6 Hong Kong dollars, against 17 for the IPO. Even though much of the company's revenue comes from smartphones sales, Xiaomi has pinned its hope on internet services to account for most of the profit in the future.

Founded in 2010 by entrepreneur Lei Jun, Xiaomi has grown from a start-up in Zhongguancun, which is known as China's "Silicon Valley", to become the world's fourth-biggest smartphone vendor at the end of a year ago, according to International Data Corp.

Xiaomi's IPO raised $4.7 billion at a valuation of about $54 billion, far lower than the big numbers that had been reported earlier in the year.

Stocks in Hong Kong and Shanghai have taken heavy hits.

The weak pricing values the firm, which also makes internet-connected home appliances and gadgets, at about $54 billion, nearly half its original US$100 billion ambition earlier this year. "It's open to everybody.If you don't like the price, you can stay away". Apple is trading at 16 times earnings and Chinese social media giant Tencent is trading at 36 times.

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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.

Xiaomi had been expected to raise up to $10 billion, split between its Hong Kong and a mainland offering.

Xiaomi is one of the world's most hotly anticipated stock market listings, having risen to prominence in developing markets, such as China.

"The debut has been pretty solid given the headwinds they've faced coming in, including the size of the deal, the newness of what they're trying to do, CDRs (Chinese depositary receipts), dual-share class voting rights and trade wars".

Xiaomi's lukewarm showing marks a blow for a smartphone maker with designs on expanding its global footprint and transforming from a low-margin hardware company into an Internet services player in the mold of Apple Inc. The company is also making waves in Europe, where after less than two years in the market, it has become the fourth biggest smartphone seller.

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