Xiaomi, one of the world’s leading smartphone makers, is hoping to raise more than $6 billion by selling shares for a stock market listing in Hong Kong next month.
The Chinese tech firm announced the planned value of the listing Saturday. It’s less than the $10 billion Xiaomi was reportedly hoping to achieve a few weeks ago, but would still make it the world’s biggest initial public offering (IPO) in nearly 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.”
Xiaomi said it’s aiming to sell almost 2.2 billion shares to global investors this week for between 17 and 22 Hong Kong dollars each ($2.20 to $2.80).
James Paradise, an Asia-Pacific president at Goldman Sachs (FADXX), which is one of the IPO’s sponsors, said Saturday that the range values Xiaomi between $54 billion and $70 billion. That’s lower than the valuation of close to $100 billion the company was reportedly seeking earlier this year.
“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.”
Hao Hong, chief strategist at Hong Kong-based broker BOCOM International, said one explanation for the lower valuation was that investors were concerned about Xiaomi’s potential to increase its profit margins in the future.
“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 (AAPL) and Samsung (SSNLF). That’s why its profit margins are very difficult to expand,” he said.
Trading in Xiaomi shares on the Hong Kong stock exchange is expected to start on July 9. The company plans to use the cash from the IPO to increase its research and development and for global expansion.
The listing is also expected to make some of the tech company’s cofounders and early employees extremely wealthy.
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SOURCE: CNN, Daniel Shane