Chinese smartphone giant Xiaomi's shares open 2.9% down in Hong Kong debut

Ruben Fields
July 11, 2018

Shares lost about 4 percent in early trading but rebounded to end the day 16.80 Hong Kong dollars ($1.98).

However, Xiaomi was still able to secure $4.7 billion United States dollars from institutional investors.

A packed initial public offering (IPO) calendar in the coming months will include a $4 billion deal from online food delivery-to-ticketing services platform Meituan Dianping and an up to $10 billion IPO from China Tower, the world's largest mobile tower operator. "And they have to speed up the pace if they aim for a good valuation", said Hong Hao, the chief strategist at brokerage BOCOM International.

One thing possibly hurting Xiaomi is the possibility of a trade war between the USA and China.

Its shares fell Monday even though the broader Hong Kong market was up about 1.5%.

Despite being one of the most anticipated Chinese technology public offerings this year, the group saw a disappointing valuation of US$54 billion, well below its ambitious US$100 billion target.

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The HK$17 price valued the company at 39.6 times its forecast 2018 earnings, while iPhone maker Apple is trading at 16 times and Chinese social media and gaming giant Tencent Holdings at 36.

At Monday's closing price the company had a market value of $53.3 billion.

Xiaomi CEO and co-founder Lei Jun acknowledged the unfortunate timing in a letter to employees Sunday that said, "Our IPO also comes with huge challenges and heavy responsibilities". The company pitches itself as going beyond devices to offer internet services, such as video streaming, although it has yet to see significant revenue in the services category.

Xiaomi made 2.18 billion shares available for purchase and was expected to sell them for between HK$17 ($2.17) and HK$22 ($2.8).

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

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