Thursday, 24 May, 2018

Xiaomi's Hong Kong IPO expected to raise at least $10 billion

Asia markets to keep an eye on US-China trade talks after a mixed close on Wall Street Zacks Investment Research Lowers Hang Seng Bank (OTCMKTS:HSNGY) to Hold
Oscar Goodwin | 03 May, 2018, 17:30

Xiaomi hasn't specified how much money it wants to raise during the IPO but the sources peg the value at somewhere around $10 Billion. Xiaomi's decision, four years after Alibaba Group Holding Ltd. chose NY, signals a new phase for the city's ambitions to rival the US market.

Xiaomi's IPO will be one of the first in Hong Kong under new rules which came into effect on Monday in an effort to attract more new-economy companies, mainly in the technology and biotech sectors. The lack of that option is one reason why Alibaba chose the United States over Hong Kong for its public listing, prompting the city's exchange to revise its rules.

Xiaomi operates differently to most companies in that it sells smartphones and smart devices at waiver thin margins, relying on services and efficient use of components to pull in profit. Its 2017 revenue surged by 67.5 per cent to $18 billion.

Xiaomi's documents also shed light on some fine details about its fast-growing business.

Xiaomi has also steadily expanded its overseas market-less than half of its phone shipments in the first quarter of this year were domestic, according to research firm IDC.

Asia markets to keep an eye on US-China trade talks after a mixed close on Wall Street
Xiaomi's Hong Kong IPO expected to raise at least $10 billion

Xiaomi mentioned in the filing that from the IPO proceedings, it will invest 30% of the fund in expanding its business in worldwide markets including Russia, Europe and South East Asia. And if there is more profit, it will be passed on to the company's users, Xiaomi said in the filing. It operates in more than 70 countries, including India where Xiaomi is the top smartphone company in terms of market share.

From smartphones, Xiaomi has been expanding its product offerings to include internet-connected home appliances, wearable devices, scooters, air purifiers and rice cookers.

Last week, Xiaomi pledged to "forever limit" its net profit margin after tax for its hardware sales to a maximum of 5%. The amends in the policy is expected to spin a new growth tangent for companies that will host IPO and get listed on the HKEC.

Typically, companies that offer different types of stock issue two classes, one that has normal voting rights, and one with "super voting" rights that's usually reserved for founders, executives and other large stakeholders. It allows founding shareholders to retain power even with minority stakes. Still, the company warns that its retail store operation requires a substantial investment, which may explain its losses.

CC, meanwhile, is acting for underwriters - CLSA Capital Markets, Goldman Sachs and Morgan Stanley Asia - fielding a team headed up by Beijing co-managing partner Tim Wang, Hong Kong corporate partner Amy Lo, Singapore capital markets partner Jean Thio and Hong Kong capital markets partner Liu Fang.

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