Xiaomi wants Chinese to buy into its IPO
Xiaomi is considering raising half of its proposed $10bn initial public offering (IPO) from mainland Chinese investors, people familiar with the matter say.
The electronics company could seek about $5bn from the sale of Chinese depositary receipts and a similar amount from selling shares in Hong Kong, the people said, asking to not be identified.
The split would depend on demand in the two markets and might change before the IPO, they said. The company was also targeting a valuation of $75bn, although that number could also change, they said.
Since Xiaomi started the IPO process, China has accelerated its push to bring more blockbuster listings to the mainland through depositary receipts, which enable a version of the shares to be traded on domestic exchanges. Selling more equity to mainland investors may be an effort to align Xiaomi with Beijing’s policy goals.
The eight-year-old company published its first prospectus for depositary receipts in Shanghai on Monday, disclosing a loss of more than $1bn in the March quarter, as it begins gauging demand for the IPO. The share sale will be used to fuel expansion beyond China and bankroll the development of devices and media services.
The projected valuation on the company has fluctuated amid concern about its prospects, with people with direct knowledge of its plans expecting anywhere from $60bn to $100bn for the Chinese smartphone maker.
The company declined to comment beyond its filing.
Raising half the money through depositary receipts would represent a much larger proportion than expected.
In its prospectus, Xiaomi said it planned to use about 40% of the proceeds to enlarge its global footprint. “In 2018, the company plans to enter or consolidate positions in Southeast Asian and European markets,” Xiaomi said in its prospectus, which did not mention a fundraising target.
Xiaomi opened its first store in Paris in May. Senior vicepresident Wang Xiang has said the company is looking to sell smartphones in the US and compete against Apple.
It reported a first-quarter 7-billion yuan ($1.1bn) net loss on revenue of 34.4-billion yuan.
The Beijing-based company saw sales from more lucrative smart-home devices and internet services grow as a proportion of overall revenue in the first quarter.
Roughly 31.8% of Xiaomi’s revenue in 2018’s first three months came from products such as air purifiers and scooters and online services such as mobile apps. Those two segments contributed 29% of sales in 2017.
Its biggest business, smartphones that barely make a profit, declined in importance to just 67.5% of sales from more than 70% in 2017.
Xiaomi made a profit excluding one-time items of 1.038billion yuan in the first quarter.
Xiaomi survived a challenging 2016 to roar back to growth in 2017, by revamping its sales model and expanding in India, where it rivals Samsung is the biggest vendor.
Led by billionaire co-founder Lei Jun, the company’s IPO would be the world’s largest first-time share sale since Alibaba listed in the US in 2014.
XIAOMI’S IPO WOULD BE THE WORLD’S LARGEST FIRST-TIME SHARE SALE SINCE ALIBABA LISTED IN THE US IN 2014