Xiaomi Plans $10 Billion IPO, Reveals Financials

Xiaomi's $10 Billion IPO filed at Hong Kong Stock Exchange under new listing regulations for technology start-ups.

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Chinese smartphone and connected device maker Xiaomi filed for an initial public offering (IPO) in Hong Kong, a move expected to raise at least $10 billion and one which would make it the largest listing by a Chinese technology firm in almost four years.

The company, the world’s fourth-largest smartphone maker by shipments, submitted an IPO application to the Hong Kong Stock Exchange under new listing regulations for technology start-ups. The filing didn’t disclose the size of the planned offering or a projected valuation (the number of shares and price details were redacted), but the company aims to raise at least $10 billion, which could value it at around $100 billion, The Wall Street Journal reported.

Those targets, if achieved, will make it the biggest Chinese tech IPO since Chinese internet giant Alibaba raised $21.8 billion in 2014.

Xiaomi posted a net loss of CNY43.9 billion ($6.92 billion) in 2017, after recording a small profit in 2016. However, excluding one-time items it had an operating profit of CNY12.2 billion, the company said in the filing.

After a weak 2016, when it lost market share in the global smartphone market, revenue last year jumped 67.5 per cent year-on-year to CNY114.5 billion.

The results mark a major turnaround for the company which ran into strong headwinds in 2016 after remarkable growth for its first few years. Xiaomi CEO Lei Jun said in the filing it “was clear to us that because we grew so quickly in our early years, we did not have an adequately strong foundation to face all the challenges in front of us. We deliberately slowed our growth to focus on strengthening three key aspects of our business: innovation, quality and supply management”.

Open letter

In an open letter that ran on WeChat’s news channel QQ as well as in the filing, Lei said: “We are building an open global ecosystem, and not a walled garden. With the era of big data and AI upon us, we believe that the high volume of data generated by our ecosystem will allow us to better understand our users’ needs and give us a significant edge to offer improved products and services.”

In the letter he reiterated its pledge to cap its net profit margin after tax for its hardware business to no more than 5 per cent, a statement he first made last week.

He said Xiaomi has built the world’s largest consumer IoT platform, connecting more than 100 million smart devices, and invested in more than 90 IoT and lifestyle companies.

The company is taking advantage of changes by the Hong Kong exchange that allow companies with different share classes to list, Bloomberg said. It named CLSA, Goldman Sachs and Morgan Stanley as the joint lead managers for the listing, expected to happen as early as end-June.

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