Chinese phone company Xiaomi sees shares drop by 6 percent on debut

Jul 10, 2018
Price fall casts shadow over future Chinese tech listings

Chinese mobile phone company Xiaomi saw its shares drop by 6 percent on its market debut last week, casting a shadow over other Chinese tech companies planning to enter Hong Kong’s capital markets.

The region has seen recent market fluctuations that have been attributed to the ongoing trade tensions between China and the US and perceived excessive valuations, which have been held to blame for the lackluster performance of a host of Chinese tech companies making their debut on the Hong Kong Stock Exchange.

Xiaomi chief financial officer Chew Shouzi said in a statement after the market opening: ‘I think we should not focus on short-term market fluctuations.’

But group founder and chief executive Lei Jun blamed ongoing trade tensions between the US and China for the subdued market performance, saying at the launch ceremony that current macroeconomic conditions were ‘far from ideal’. 

Xiaomi is not the only tech company that has experienced a rough ride on the Hong Kong market recently, however. In fact, most companies that have listed in the past year have seen their shares fall below the offer price.

Yixin Group, China’s largest online car retailer, has lost almost 60 percent of its market value since its debut last November, while shares in Razer, a gaming hardware manufacturing company, have fallen more than 55 percent since last December. Meitu, which makes photo-editing applications and smartphones, and online insurer ZhongAn Online have also seen their shares dip below their offer prices despite initial rises.

Reports in the region highlight how many investors and analysts have been questioning Xiaomi’s target market valuation since it announced plans to float its shares. The Beijing-based technology group had hoped for a valuation of $100 bn, presenting itself as an internet company rather than a hardware business. But the final offer price of HK$17 ($2.20) per share put the company’s market capitalization at around $54 bn.

Yet Xiaomi is the first company to list in Hong Kong with a dual-share class structure, a policy that gives greater voting rights to certain shareholders and has been adopted by companies including Alibaba and Facebook.

There is, however, a fear that the unexciting debuts could well deter other Chinese tech companies from making Hong Kong listings and hurt investors’ appetite for Chinese tech stocks.

In a recent statement, Tencent Holdings says it intends to list its music business subsidiary Tencent Music Entertainment Group in the US instead of Hong Kong.

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