Xiaomi is said to consider raising half of $10 billion IPO from CDR sale

Xiaomi on Monday, disclosed a loss of more than $1 billion in the March quarter, as it begins gauging demand for the IPO.

By: Bloomberg | Published: June 13, 2018 3:40:32 pm
Xiaomi, Xiaomi IPO, Xiaomi CDR Sale, Xiaomi Hong Kong IPO, Xiaomi China IPO, Xiaomi to sell shares, Xiaomi biggest IPO after Alibaba, Xiaomi  billion IPO Xiaomi published its first prospectus for CDRs in Shanghai on Monday. (Image: Bloomberg)

Xiaomi Corp is considering raising about half of its proposed $10 billion initial public offering from mainland Chinese investors, people familiar with the matter said. The company may seek about $5 billion from the sale of Chinese depositary receipts and a similar amount from selling shares in Hong Kong, the people said, asking to not be identified as the details are private. The split will depend on demand in the two markets and may change before the IPO, they said. The company is also targeting a valuation of about $75 billion although that number could also shift, the people said.

Xiaomi’s IPO, the largest since Alibaba’s 2014 debut, comes as China accelerates a push to attract more blockbuster listings through CDRs that enable a version of the shares to be traded on domestic exchanges. Selling more equity to local investors aligns Xiaomi with Beijing’s policy goals and helps it command a higher valuation. On Tuesday, JPMorgan, Morgan Stanley and CLSA — all of which are sponsoring or arranging the IPO — put Xiaomi’s price tag at anywhere from $65 billion to $100 billion depending on the metrics used.

“Giving mainland investors more access to Xiaomi’s shares will definitely help it balloon its valuation,” said James Yan, an analyst with consultancy Counterpoint. “Xiaomi’s entire ecosystem is built in China: all of its partner companies from makers of drones to vacuum cleaners, see mainland China as their single most important market and so does Xiaomi.”

Also Read: Xiaomi Redmi 6 vs Redmi 5: What’s the difference?

The eight-year-old company published its first prospectus for CDRs in Shanghai on Monday, disclosing a loss of more than $1 billion in the March quarter, as it begins gauging demand for the IPO. The share sale will be used to fuel expansion beyond China and bankroll the development of devices and media services. The company’s projected valuation has fluctuated amid concern about its prospects: people with direct knowledge of its plans are expecting anywhere from $60 billion to $100 billion for the Chinese smartphone maker. The company, which is expected to price and list over the summer, declined to comment beyond its filing.

China is still developing the final rules for CDRs and raising half the money through such securities would represent a much larger proportion than expected. Reuters reported earlier this month that the company planned to sell about 30 percent of the stock to mainland investors. In its CDR prospectus, Xiaomi said it plans to use about 40 percent of the proceeds to enlarge its global footprint. Xiaomi reported a 7 billion yuan ($1.1 billion) net loss on revenue of 34.4 billion yuan in the first quarter.

Also Read: Xiaomi Redmi Y2 review: Selfie phone for a budget price

“In 2018, the company plans to enter or consolidate positions in Southeast Asian and European markets,” Xiaomi said in its Chinese prospectus, which didn’t mention a fundraising target. It opened its first store in Paris last month, while Senior Vice President Wang Xiang has said multiple times the company is looking to sell smartphones in the US and compete against Apple Inc.

Xiaomi, Xiaomi IPO, Xiaomi CDR Sale, Xiaomi Hong Kong IPO, Xiaomi China IPO, Xiaomi to sell shares, Xiaomi biggest IPO after Alibaba, Xiaomi $10 billion IPO China is still developing the final rules for CDRs and raising half the money through such securities would represent a much larger proportion than expected. (Image: Bloomberg)

Xiaomi survived a challenging 2016 to roar back to growth in 2017, bouncing back by revamping its sales model and expanding in India, where it rivals Samsung Electronics Co as the biggest vendor. Led by billionaire co-founder Lei Jun, the company’s IPO would be the world’s largest first-time share sale since Alibaba Group Holding Ltd listed in the US in 2014. The IPO is jointly sponsored by banks including CLSA, Goldman Sachs and Morgan Stanley in Hong Kong and CITIC Securities in mainland China.

Also Read: Xiaomi unveils big loss as it prepares to hawk IPO to investors

The Beijing-based company saw sales from more lucrative smart-home devices and internet services grow as a proportion of overall revenue in the first quarter. Roughly 31.8 percent of Xiaomi’s revenue in 2018’s first three months came from products such as air purifiers and scooters and online services such as mobile apps, according to the filing. Those two segments contributed 29 percent of sales in 2017. Its biggest business, smartphones that barely make a profit, declined in importance to just 67.5 percent of sales from more than 70 percent in 2017. Xiaomi said it made a profit excluding one-time items of 1.038 billion yuan in the first quarter.

For all the latest Technology News, download Indian Express App

Advertisement
Advertisement
Advertisement
Advertisement