More than $6 billion is hoped to be raised by selling shares in a stock market listing in Hong Kong next month by Xiaomi – amongst the leading smartphone makers of the world.
The planned value of the listing was announced by the Chinese tech firm on Saturday. The value is lower than the $10 million figure that the company had said it hoped to achieve a few weeks ago. However, the number would still be the largest initial public offering (IPO) in the last two years.
“In the future, Xiaomi has huge potential for growth,” CEO Lei Jun said at a news conference in Hong Kong. “We’re a very rare company that can do hardware, e-commerce and internet services.”
Priced between 17 and 22 Hong Kong dollars each ($2.20 to $2.80), the tech compnay is planning to sell almost 2.2 billion shares to global investors in the IPO, Xiaomi said.
The range values Xiaomi between $54 billion and $70 billion, said James Paradise, an Asia-Pacific president at Goldman Sachs which is also one of the sponsors of the IPO. Compared to the almost $100 billion Xiaomi was reportedly hoping earlier this year, the valuation figure would be lower.
“We never said how much we were valued,” CFO Chew Shou Zi said at the news conference. “In the last several months, the market had a lot of speculation.”
There is concern among investors about the ability of Xiaomi to enhance its profit margins in the future and that is the primary reason for the lower valuation, said Hao Hong, chief strategist at Hong Kong-based broker BOCOM International.
“The explosion of Xiaomi has been at the low end of the market. It’s not taking the premium end of the market like Apple and Samsung. That’s why its profit margins are very difficult to expand,” he said.
It is expected that trading for the shares of Xiaomi would begin on July 9 on the Hong Kong stock exchange. Increasing its research and development facilities and global expansion would be the primary use of the money that would come from the IPO.
It is also expected that some of the cofounders of the company and its early employees would be made extremely wealthy by the listing.
For his contributions to the company, stock worth about $1.5 billion was awarded to the cofounder and the CEO of the company Lei, Xiaomi said in a recent filing.
Xiaomi said that the awarding of the stock was a common practice.
“We reached a consensus to make the decision because of Lei’s devotion over the last eight years, he started the company from scratch,” said Xiaomi President Lin Bin, another cofounder.
(Adapted from Money.CNN.com)