Xiaomi sharply curtails IPO valuation ambitions
Firm now sees up to US$70.3bil compared to US$100bil previously
HONG KONG: Xiaomi Corp started taking orders for the world’s biggest initial public offering (IPO) in nearly two years, sharply curtailing its earlier valuation ambitions as it seeks to raise up to US$6.1bil in Hong Kong.
The Chinese smartphone maker and existing investors are offering 2.18 billion shares at HK$17 to HK$22 apiece, according to terms for the deal obtained by Bloomberg.
The price range values Beijing-based Xiaomi at US$53.9bil to US$69.8bil, the terms show. That could rise to as much as US$70.3bil if a so-called over-allotment option is exercised.
Top Xiaomi executives were initially pushing for an IPO valuation of as much as US$100bil when they began listing preparations last year, Bloomberg News reported at the time.
The tussle over valuation stems partly from mixed messages about what Xiaomi does. While 70% of revenue comes from selling smartphones, co-founder Lei Jun insists that Xiaomi’s real goal is to be an Internet services company making money off ads and online games.
China Mobile Ltd, the nation’s biggest wireless carrier, and US wireless-chip giant Qualcomm Inc are among firms that have agreed to buy Xiaomi stock as cornerstone investors.
Xiaomi expects to take orders from institutional investors through June 28 and aims to start trading in Hong Kong July 9, according to the terms.
Xiaomi, led by serial entrepreneur Lei Jun, was the first to file for a Hong Kong IPO with a weighted-voting rights structure after the city’s bourse changed its rules in April.
The deal could become the world’s biggest first-time share sale since September 2016, when Postal Savings Bank of China Co raised US$7.6bil in a Hong Kong IPO, data compiled by Bloomberg show.
The IPO price range translated to 22.7 times to 29.3 times Xiaomi’s forecast 2019 earnings, people with knowledge of the matter said.
The figures assume that so-called over-allotment option is fully exercised, according to one of the people. The price range valued the company at 39.6 times to 51.3 times this year’s estimated profit on that basis, the person said.
A representative for Xiaomi said she couldn’t immediately comment on the valuation multiples.
State-owned conglomerates China Poly Group and China Merchants Group Ltd are among seven cornerstone investors that have committed to buy about US$548mil of stock in the offering, according to the terms.
Qualcomm and China Mobile each committed to invest US$100mil, the terms show.
Chinese express-delivery firm SF Holding Co and policy lender China Development Bank Corp’s private equity arm have also committed to purchase shares in the IPO. — Bloomberg