Xiaomi shares set to drop in Hong Kong debut

Isaac Cain
July 11, 2018

One of the reasons that has been floated for Xiaomi's slow start is that investors are generally unsure about the company because of its uniqueness.

Xiaomi Inc., an established smartphone maker in China, saw its share price drop during the company's first day of trading in Hong Kong, as the unfolding trade war between China and the USA causes investors to doubt the market. And in an unusual display of transparency, the printed version was then left at the reception desk where reporters signed in for the company's press conference in Hong Kong.

The Chinese company was established in 2010 and is now the world's fourth-largest smartphone manufacturer by producing low-cost devices that have drawn comparisons to iPhone.

The smartphone maker said on Friday it raised just US$3.1 billion after pricing the IPO at the bottom end of a range, cutting its valuation to about US$54 billion - roughly half of the initial goal. This has resulted in the Hong Kong stock market, Hang Seng, falling to a nine-month low.

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

"I work for Xiaomi and I am here to attend the IPO ceremony. It's open to everybody.If you don't like the price, you can stay away". A lot of companies that went public in 2017 and 2018 have seen their share prices plummeting and the situation was made worse thanks to the ongoing trade war between China and the U.S. Instead, the current valuation of $46 billion essentially means the company's value remains unchanged from its last fundraising round in 2014.

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"Other IPO candidates will rush to Hong Kong to list before the market sentiment shifts".

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

Xiaomi also postponed a plan to offer shares in mainland China, which would have given it access to capital from still more investors.

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.

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

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