China's Xiaomi: Smart phones, no smart IPO

Chinese Smartphone Maker Xiaomi Falls in Hong Kong Trading Debut

Xiaomi shares closed at HK$16.80, having touched a low of HK$16 in early trade, compared to the IPO price of HK$17 per share. The stock opened at HK$16.60, below the list price of HK$17, and it quickly fell to HK$16 before later recovering.

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.

In June, we said that Xiaomi was looking to raise about $5 billion (HK$39.22 billion) from shares, while it didn't meet its goal in the first day of trading, it is over half way there and maybe things will pick up for the unique firm.

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

The company, which makes phones to rival Apple's iPhone, had hoped to hit a valuation of $100bn in the float, but is now valued at around $53bn.

Xiaomi's founder Lei Jun described his company's business model as a "triathlon model" with three components; third-party hardware sales, smartphone sales, and "internet service" sales which include media and ads.

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The Xiaomi float adds to Hong Kong's $7 billion worth of new listings so far this year. It is also the first under the city's new rules permitting dual-class shares, common among USA tech firms, in an attempt to attract tech sector floats.

"We are an internet firm".

Shares of some other tech-related companies that floated recently have been weak in Hong Kong.

Despite being one of the most anticipated Chinese technology IPOs this year, Xiaomi saw a disappointing valuation of $54 billion (€46 billion), well below its ambitious $100 billion target.

Xiaomi focuses on low-cost, high-performance smartphones and touts an innovative business model that features online services, a range of consumer electronics products built by partner firms, and a retail strategy that includes a network of physical stores.

The company is now the biggest smartphone vendor in India and is pushing into European markets including Spain and Russian Federation, though it has lost share in China recently to lower-cost rivals.

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