Tech giant Xiaomi yet to satisfy investors
XIAOMI’S market debut has failed to convince investors that it’s capable of shedding a reliance on cheap phones and becoming an internet giant.
The Chinese smartphone giant now faces intense scrutiny while it tries to prove it should be twice as expensive as Apple.
After raising $4.7 billion (R63.18bn) in an initial public offering (IPO) selling stock at the bottom of its marketed range, the first day of trade saw the shares slide as much as 6 percent in Hong Kong.
The IPO had been touted as the culmination of a remarkable turnaround and the starting gun for a clutch of mega debuts, but it came amid sliding markets and an escalating trade spat between the US and China.
Co-founded by billionaire Lei Jun, Xiaomi has a market value of about $50bn, a far cry from the $100bn touted last year. The 1.2 percent slide at the close of trade is the worst first-day performance for a $1bn-plus Hong Kong IPO since 2015.
Chilling
Such a high-profile stumble may have a chilling effect on a swathe of Chinese tech corporations keen on raising capital to fuel their ambitions, from Meituan Dianping in Hong Kong to Tencent Music in the US. It’s a disappointing showing for an eight-year-old smartphone label with designs on expanding globally and transforming from a low-margin hardware company into an internet services player in Apple’s mould.
Xiaomi priced its IPO at earnings multiples higher than more established tech giants, including Apple, Tencent Holdings and Facebook, arguing it was an internet services company, even as most of its revenue came from hardware. It then suffered a number of setbacks, from being forced to jettison plans to sell Chinese depositary receipts in Shanghai to the trade tensions.
Xiaomi’s IPO was hailed as the most important Chinese technology debut in years, attracting A-list investors such as George Soros and fellow billionaires Li Ka-shing, Jack Ma and Pony Ma. Institutional investors including Hillhouse Capital, Qualcomm and China Mobile also chipped in.