Chinese smartphone maker Xiaomi's shares dropped nearly five per cent soon after the company debuted its IPO at the Hong Kong Exchange at the bottom end of its target range.
Xiaomi's IPO raised $4.7 billion at a valuation of about $54 billion – a number far lower than what was reported in early 2018. The company had to price its shares at 17 Hong Kong dollars at the bottom end of its target range after reducing its offer size, the South China Morning Post reported.
Industry analysts cited trade war between the United States and China for the relatively weak pricing. Analysts, however, have said that the market might have concluded that Xiaomi has been overhyped.
‘Honestly, Xiaomi is not an internet company. It’s just a hardware company. That’s the problem,’ said Dickie Wong, Executive Director for Research at Kingston Financial in Hong Kong.
The company plans to use 30 per cent of its IPO proceeds to develop AI and IoT ecosystems.
The valuation of the eight-year-old company was cut to $54.3 billion, about half of the $100 billion sought. Earlier, Xiaomi aimed to raise $10 billion in an IPO that may have had valued the company at $100 billion.
And while its phones have received positive reviews and its “Internet of Things” platform now holds over 100 million connected devices, Xiaomi’s business is largely driven by its home market and fast growth in India.
Globally, Xiaomi stands tall at the fourth spot in the smartphone market, behind Samsung, Apple and Huawei. According to Counterpoint Research, Xiaomi with over 51 per cent growth stood at fifth spot in the home market in the first quarter of 2018, making it the fastest growing brand in China in the first quarter.
This exponential growth can be attributed to the Xiaomi's expansion in the offline segment with aggressive promotions. The company has cemented its popular Redmi Note line-up with new additions in the mid-segment, giving more choice to budget-conscious consumers.
With 30.3 per cent market share, Xiaomi continues to lead the Indian smartphone market in the first quarter of 2018, claims IDC.
According to IDC’s Quarterly Mobile Phone Tracker, Xiaomi also continued its dominance in the online smartphone market with 59.6 per cent market share. The popularity of Redmi Note 5 and Redmi 5A and Xiaomi’s efforts in expanding its offline presence are key contributors in Xiaomi’s growth in the smartphone market.