Phone maker Xiaomi falls then rises in Hong Kong debut

Tuesday, 10 Jul, 2018

China's Xiaomi, the world's fifth biggest seller of smartphones, made an underwhelming public debut after it hit the Hong Kong Stock Exchange amid concerns around an ongoing trade war between the USA and China.

In June, we said that Xiaomi was looking to raise about $5 billion (HK$39.22 billion) from shares, while it didn't meet its goal in the first day of trading, it is over half way there and maybe things will pick up for the unique firm.

Its shares touched a low of HK$16 in early trade and later rallied to briefly touch its IPO price. The stock opened at HK$16.60, below the list price of HK$17, and it quickly fell to HK$16 before later recovering.

Beijing-based Xiaomi is the first firm in Hong Kong to trade with a controversial dual-class structure since listing rules were overhauled to allow weighted voting rights for different sets of shareholders.

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.

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. However, its listing timing will depend somewhat on Xiaomi's stock performance, sources have told Reuters.

Asked if the low pricing of Xiaomi and some other technology firms will weigh on upcoming IPOs, Hong Kong stock exchange CEO Charles Li said at the Xiaomi listing ceremony: "We can not put a brake". Ping An Healthcare and Technology Co Ltd dropped below its IPO price on the second day of trading in May. The market is always open.

Xiaomi priced the IPO at the bottom of the range it offered, in a deal worth $4.72 billion - the world's biggest technology float in nearly four years.

Let us know in the comments if you think Xiaomi will do well in the medium and long term in terms of its stock price.

But doubts about the sustainability of its business model were among the reasons for the lower valuation, analysts said.