The Hong Kong stock exchange, where Xiaomi is floating the world’s largest initial public offering since 2014.
Smartphone firm’s flotation could be world’s largest initial public offering in years valuing company at $100bn.
The Chinese smartphone maker Xiaomi is reportedly seeking to raise at least $10bn by floating on the Hong Kong stock exchange, in what could be one of the world’s biggest initial public offerings in years.
Xiaomi is reportedly raising at least $10bn , which could value the company by as much as $100bn. That would make Xiaomi the third largest Chinese tech company by value after Tencent and Alibaba, two of the country’s so-called “national champions”.
Proceeds of the listing will go towards research and development, the company’s global expansion, and investment in internet-connected devices, or internet of things products, the filing said. The company made a loss of $6.9bn last year.
The move is a win for Hong Kong, which recently unveiled new rules to allow tech companies with weighted voting rights to list. The lack of that option is one reason why Alibaba chose the US over Hong Kong for its public listing, prompting the city’s exchange to revise its rules.
The “triathlete” of Chinese tech companies
The eight-year-old start-up, whose name in Chinese means “millet”, first cultivated a following in China by selling Apple knock-offs at half the price of the real products. In those early years, Xiaomi’s founder, Lei Jun, a serial entrepreneur who also favoured black turtlenecks, was often referred to as “China’s Steve Jobs”, a label he criticised .
Xiaomi now describes itself as the “triathlete” of Chinese tech companies. Most of its revenues come from smartphone sales, sold at a low profit margin. The rest come from selling smart household gadgets – Xiaomi rice cookers, scooters or air conditioners – and internet services like entertainment and financial service apps.
In an open letter included in the filing, the 48-year-old founder acknowledged the company’s struggles in 2016 when phone sales declined as competitors churned out cheaper options.
“It was clear to us that because we grew so quickly in our early years, we did not have an adequately strong foundation to face all the challenges in front of us at the time,” Lei wrote.
The company invested in businesses involved in lifestyle and internet of things products, and Lei asked his co-founder to step aside so he could take over as the company’s supply chain chief. Between 2015 and 2017, sales increased by 70% to 114.6bn yuan ($17.9bn), according to the filing.
The company is the fourth largest smartphone maker in the world by shipments, behind Samsung, Apple, and Huawei, according to data from the International Data Corporation (IDC). It operates in more than 70 countries, including India where Xiaomi is the top smartphone company in terms of market share.
Xiaomi still depends on China for the majority of its revenues, a challenge given that that market is nearing saturation. For the first time in five years, smartphone shipments dipped below 100m in the first quarter of this year, according to IDC. Xiaomi phones are popular with first time buyers, but shoppers often upgrade to Apple or other phones in their later purchases.