Chinese smartphone manufacturer Xiaomi’s initial public offering in Hong Kong on Monday morning struggled as its shares fell by almost 6%.
Xiaomi shares opened at HK 16.60 (USD 2.12) a share which was below the low-end of the predicted range of the initial offering price of HK 17. The Company had an earlier range set from HK 17 to HK 22 for about 2.18 Billion shares on the offering when it traded for as low as HK 16 a share and closed at HK 16.80 on Friday. Xiaomi raised around HK 23.97 Billion (USD 3.05 Billion) after fees and expenses, according to the Company.
The smartphone developer was established in 2010 and is currently the world’s fourth largest smartphone manufacturer known for producing low-priced devices.
Xiaomi President and Co-Founder, Lin Bin, told CNBC on Monday, “I think short-term stock price is mostly dictated by market conditions. What we will be doing is to focus on the long-term growth of our business.” The Founder also said the impact of the trade fight between the U.S. and China wasn’t a huge concern in the short term since Xiaomi had not do much business in the U.S.
Head of research at BOCOM International, Hao Heng, anticipated the relatively poor performance and said, “The share was priced at a very high valuation multiple, substantially higher than its global peers. Even though Xiaomi remained to be a very good story, I think the market is at a stage where you have to prove yourself first before the market can give you a good valuation.”
Some analysts cited the reasons for the weak pricing could be due to Chinese CDR delay and negative investor sentiment for global equities amidst trade war.
The markets expect Xiaomi to offer CDRs but people are unsure when, from as early as the next few months or even next year. “We decided to postpone the CDR just to ensure the success of the CDR with a very graceful, mutual agreement with CSRC (China Securities Regulatory Commission). So, we will be revisiting CDR at a proper time in the future.”