EXCLUSIVE-China's Xiaomi cuts valuation after pulling mainland offering - sources
(Repeats to fix technical glitch)
* Xiaomi cuts valuation from earlier estimates, low is now
* Xiaomi sought a higher valuation than regulators
* Company still expected to launch HK portion of IPO this
* Hong Kong deal size yet to be finally decided
By Julie Zhu and Fiona Lau
HONG KONG/SHANGHAI, June 19 (Reuters/IFR) - Chinese
smartphone maker Xiaomi has lowered its likely valuation to
between $55 billion and $70 billion following its decision to
delay its mainland share offering until after its Hong Kong IPO,
three sources with direct knowledge of the matter said.
The delay was triggered by a dispute between the company and
regulators over the valuation of its China depositary receipts
(CDRs), sources said, casting doubt on Beijing's efforts to lure
foreign-listed Chinese tech giants back home.
Xiaomi Corp is using a range of $55
billion to $70 billion in its discussions with potential
cornerstone investors ahead of the planned launch of its Hong
Kong initial public offering (IPO) later this week, three
The sources declined to be named because the discussions
were not public. Xiaomi did not immediately respond to a request
for comment on the valuation.
The new valuation is far below the $100 billion touted by
sources earlier this year and below the more recent floor price
of $70 billion that the company and its advisers had informally
used as guidance for investors.
Pre-IPO research from its sponsoring banks valued the group
at between $65 billion and $86 billion, Thomson Reuters' IFR
reported last week.
The company said it was asking regulators to postpone its
application to sell CDRs, but gave no reason for the decision.
"After iterative, careful research, the company has decided
to implement its Hong Kong and mainland IPO in a measured way,"
Xiaomi said in a post on its Weibo account.
"We'll list in Hong Kong first, before going public on the
mainland through the CDR."
Beijing-based, Cayman-domiciled Xiaomi had been expected to
raise up to $10 billion, split between its Hong Kong and
mainland offerings in one of the biggest tech floats worldwide
in recent years. Two sources said it was looking to sell about
10 percent of its enlarged capital in the Hong Kong offering.
The delay to its CDRs is a blow for Chinese officials, who
have designed the offerings as a means for China to compete
globally for major tech listings and give mainland investors
access to its tech champions.
Other companies known to be considering CDRs include Alibaba
, search engine giant Baidu and JD.com,
Alibaba's e-commerce rival.
In Xiaomi's case, officials from the China Securities
Regulatory Commission (CSRC) wanted the CDRs to be priced below
the level the company was targeting, according to two sources.
Commission officials were concerned that a too-high
valuation would lead to poor performance in the secondary
market, damping investor enthusiasm for future CDR sales, the
Xiaomi executives on the other hand were looking for a high
mainland price to help generate excitement among Hong Kong
investors, whose tranche was expected to debut the day after the
CDRs went public.
CSRC officials did not respond to requests for comment.
Xiaomi was set up in 2010 and doubled its smartphone
shipments in 2017 to become the world’s fourth-largest maker,
according to Counterpoint Research, defying a global slowdown in
Its listing has come at a delicate time for China's stock
markets, with the CSI 300 index of the country's top blue-chips
falling 4.3 percent this month and 10.9 percent this year amid
fears of a trade war with the United States.
"The China stock market is so fragile," said David Dai,
general manager of Shanghai Wisdom Investment Co Ltd, a hedge
fund. "I think Xiaomi is worried about its valuation, and is
considering a China listing at a better time."
The government needed to stabilise the market if it wanted
to preserve its ability to raise capital for companies, he
Xiaomi is still expected to go ahead with its Hong Kong
listing, which it plans to kick off later this week. The exact
size of the Hong Kong deal is not yet clear, said the sources.
CDRs were due to account for around half of the combined
Hong Kong and mainland issuance, Xiaomi said last week.
Difficulties with finalising the details of CDR rules and
scheduling issues also contributed to the delays, sources said.
(Reporting Julie Zhu in HONG KONG, Fiona Lau of IFR, Adam
Jourdan and Samuel Shen in SHANGHAI and Beijing Monitoring Desk;
Writing by Jennifer Hughes; Editing by Stephen Coates)
First Published: 2018-06-19 02:59:18
Updated 2018-06-19 10:26:22
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