Published: Mon, July 09, 2018
Industry | By Terrell Bush

Phone maker Xiaomi falls then rises in Hong Kong debut

Phone maker Xiaomi falls then rises in Hong Kong debut

But some of them may face a bumpy ride amid volatile markets and escalating trade tensions.

Founder Lei Jun described Xiaomi as a new species of company, pursuing a "triathlon business model" combining hardware, internet and e-commerce services. Before Monday, Hong Kong's benchmark index had fallen more than 10% from early June.

Xiaomi's debut is seen as a key test of investor sentiment for what is expected to be a packed second-half of the year for Hong Kong IPOs, with offerings including online food delivery-to-ticketing services platform Meituan Dianping.

"At this critical moment in Sino-US trade relations, the global capital markets are in constant flux", he said.

"Although the macro-economic conditions are far from ideal, we believe a great company can still rise to the challenge and distinguish itself", he said.

Aside from global market concerns, investors are said to have been unsure of Xiaomi's ecosystem story.

"The tit-for-tat going on in the political front between the Unites States and China is spilling over, especially in the tech space,"said Jake Saunders, an analyst at ABI Research".

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Typically companies are valued on a multiple of profits or sales.

Smartphone maker Xiaomi Corp., whose shares will debut in Hong Kong trading Monday, is one of the most-watched tech IPOs since the 2014 flotation of Alibaba Group Holding Ltd. Xiaomi raised $4.7 billion through the issuance of 2.2 billion shares, but the pricing was 23% lower than projected.

Founded in 2010, Xiaomi was the fifth biggest smartphone maker in the world previous year, according to research firm IDC.

Xiaomi's float was the first under the city's new rules allowing firms to weight voting rights in favor of company founders, as part of efforts to encourage more tech groups to choose Hong Kong over NY, its arch-rival.

Xiaomi, which helped to pioneer the trend for ultra-low-priced smartphones, says it plans to become an equipment-and-hardware brand alongside Apple Inc.

The company is now the biggest smartphone vendor in India and is pushing into European markets including Spain and Russian Federation, though it has lost share in China recently to lower-cost rivals.

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