Smartphone maker Xiaomi's weak Hong Kong debut casts shadow on tech listings

Chinese Smartphone Maker Xiaomi Falls in Hong Kong Trading Debut

Chinese Smartphone Maker Xiaomi Falls in Hong Kong Trading Debut

Some analysts say the share price offering of HK$17 ($2.17) was too high a valuation multiple for the company compared to its competitors like Apple, making the stock too expensive from the onset.

Xiaomi founder, Chairman and CEO Lei Jun (2nd R) attends the listing of the company at the Hong Kong Exchanges in Hong Kong, China July 9, 2018.

The 8-year-old company has yet to give details of how that business model will work outside China.

Xiaomi's IPO raised $4.7 billion at a valuation of about $54 billion - the world's biggest tech or telecom listing since Alibaba raised more than $20 billion in 2014, according to data provider Dealogic. This has resulted in the Hong Kong stock market, Hang Seng, falling to a nine-month low. It later expanded into computers, TVs and home appliances. "If you don't like the price, you can stay away".

However, Mo Jia (賈沫) of research firm Canalys said the IPO was a "must-go for them even though the current situation is not positive", as Xiaomi would need the cash for an ongoing global expansion as it looks to broaden its scope outside the saturated Chinese smartphone market.

Xiaomi has also faced questions from analysts over its ability to increase profit margins in the future, given that much of its smartphone sales are at the lower end of the market.

"Other IPO candidates will rush to Hong Kong to list before the market sentiment shifts".

The weak debut arrived at one side while at another side, trade clash between the United States and China is escalating due to which global markets have disturbed.

The stock price at current levels is nearly identical with the $45 billion valuation that Xiaomi achieved at the end of 2014 and the start of 2015, when the company was at its height.

"Without the innovation of the Hong Kong capital markets, it would be hard for us to have a chance to list publicly in Hong Kong", Lei said, according to a transcript provided by the company.

The company had also expected to split its listing with another offering on mainland China, but cancelled that.

Xiaomi is an internet company with smartphones and smart hardware connected by an IoT platform at its core. The deal was led by CLSA, Goldman Sachs and Morgan Stanley.

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