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

At opening, each Xiaomi share was valued at 16.60 Hong Kong dollars ($2.12), below the initial offering price of HK$17 ($2.17). The stock finally closed at HK $16.80 but dropped as low as HK $16 earlier in the day (a decrease of 5.88%).

Today, July 9, was the first day for Xiaomi on the Hong Kong Stock Exchange, with the stock closing at $2.14, giving the Chinese smartphone manufacturer a valuation of almost $50 billion, though it should be noted that this is half the market capitalization of $100 billion that was expected from the IPO.

After its first day on the market, Xiaomi ended up raising $3.05 billion United States dollars.

Xiaomi's debut is seen as a key test of investor sentiment for what is expected to be a packed second-half of the year for Hong Kong IPOs, with offerings including online food delivery-to-ticketing services platform Meituan Dianping.

Despite Xiaomi's challenging debut, Reuters notes that Hang Seng - the Hong Kong stock market index - was 1.7 percent higher.

Xiaomi's HK$17 price represents a multiple of 39.6 times 2018 earnings, while iPhone maker Apple is trading at 16 times and Chinese social media and gaming giant Tencent Holdings at 36.

Xiaomi's float failed to attract strong interest among investors with the retail tranche gathering demand that was only 9.5 times the number of shares on offer, according to its filing on Friday.

The company had grown from a small startup to become the world's fourth-largest smartphone vendor at the end of a year ago.

Speaking at the ceremonial opening of trading, Xiaomi's chairman Jun Lei acknowledged that the timing of the IPO might not be optimal given the state of trade friction between the U.S. and China. From day one, we've set up a dual-class share structure. That is far short of the oversubscription rates for other tech IPOs in Hong Kong.

But doubts about the sustainability of its business model were among the reasons for the lower valuation, analysts said.

(Copyright © 2015. All Rights Reserved.)
 
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