Published: Tue, July 10, 2018
Electronics | By Shannon Stone

Xiaomi raises $3.05 billion United States dollars following its IPO

Xiaomi raises $3.05 billion United States dollars following its IPO

Smartphone maker Xiaomi Corp., whose shares will debut in Hong Kong trading Monday, is one of the most-watched tech IPOs since the 2014 flotation of Alibaba Group Holding Ltd. Xiaomi raised $4.7 billion through the issuance of 2.2 billion shares, but the pricing was 23% lower than projected.

The day began with a value of HK $16.60, plunging down by 6 percent before closing up 1.2 percent.

The lackluster start came after Xiaomi priced its IPO at the low end of an expected range, giving the company a valuation of $54 billion.

Xiaomi's Founder, Chairman and CEO Lei Jun (right) and Chew Shou Zi, senior vice president and chief financial officer gesture during the listing ceremony at the Hong Kong Stock Exchange in Hong Kong on July 9, 2018.

Xiaomi's float was the first under the city's new rules allowing firms to weight voting rights in favor of company founders, as part of efforts to encourage more tech groups to choose Hong Kong over NY, its arch-rival.

Despite Xiaomi's challenging debut, Reuters notes that Hang Seng - the Hong Kong stock market index - was 1.7 percent higher.

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.

Potential investors also struggled to view the company as the internet play it considers itself to be, rather than as a smartphone maker - the lower-margin business that now generates most of its profits, sources said. There has been a bit of debate as to whether or not it is a hardware company or an internet company, perhaps when the dust settles and investors know what they're getting into we could see the price move in Xiaomi's favour.

The Xiaomi float adds to Hong Kong's $7 billion worth of new listings so far this year.

However, Xiaomi was still able to secure $4.7 billion Dollars from institutional investors. It is also the first under the city's new rules permitting dual-class shares, common among US tech firms, in an attempt to attract tech sector floats.

It is now the biggest smartphone vendor in India and is pushing into European markets including Spain and Russian Federation, though it has lost share in China recently to lower-cost rivals.

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