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

Ann Santiago
May 3, 2018

Chinese smartphone maker Xiaomi filed documents today with Hong Kong's stock exchange operator for an initial public offering that could be the world's biggest share sale in years. In an open letter reminiscent of Google's own pre-IPO manifesto, Lei pledged to transform Xiaomi into more than a hardware company and again promised to cap its hardware profit margins at 5 percent - returning any excess to its users. The company has posted a net loss of 43.9 billion yuan in 2017 while the revenue increased by 67.5 percent a year ago. The wide spectrum of products includes air purifiers, rice cooker, wearables, electric scooter, Mi TV, Mi Drone and etc. Xiaomi said it registered a revenue of 23.5 billion yuan previous year from its ecosystem. Xiaomi CEO, Cofounder lauded the policy change in Hong Kong and called it "a great policy innovation".

Founded in 2010, Xiaomi was the fifth biggest smartphone maker in the world a year ago, shipping more than 92 million devices, according to research firm IDC. Though it suffered through a challenging 2016, the company bounced back by revamping its sales model and expanding in India, where it rivals Samsung Electronics Co.as the biggest vendor.

Xiaomi's listing plans come as the company and its investors look to capitalise on a bull run for the Hong Kong market, which has seen the benchmark Hang Seng Index rise about 27 per cent over the past year.

"As far as we know, apart from Xiaomi, there has never been another smartphone company that has successfully rebounded after a decline in sales", he wrote. It's a big win for Hong Kong Exchanges & Clearing Ltd., whose officials spent years pushing to scrap a ban on the weighted voting rights that give founders control even with minority ownership.

Xiaomi made headlines in 2014 when it became the world's most valuable startup. Still, the company warns that its retail store operation requires a substantial investment, which may explain its losses.

The firm is also expected to issue Chinese depositary receipts after it goes public.

"The U.S. market is very important to us but we are very, very carefully building our resources to serve the U.S. consumer", Xiaomi's head of global business, Wang Xiang, told CNBC in February.

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