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Xiaomi's weak debut signals trouble for upcoming Hong Kong tech listings

Reuters  |  HONG KONG 

By Julie Zhu

HONG KONG (Reuters) - Corp made a weak debut in Hong Kong on Monday, with the Chinese maker's shares sliding as much as 6 percent on valuation concerns, in an ominous sign for its lining up listings in the city.

A packed initial public offering (IPO) calendar in the coming months will include a $4 billion deal from Meituan Dianping and an up to $10 billion IPO from Tower, the world's largest

"Given the targeted high valuations of many new-economy IPO hopefuls and the number of IPOs going forward, it will be challenging for the market to digest all of them," said Hong Hao, at brokerage

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 main Hong Kong stock market index ended 1.3 percent higher.

priced the IPO at the bottom of the range it offered, in a deal worth $4.72 billion - the world's biggest in almost four years.

The listing came, however, as escalating trade tensions between the and have shaken markets over the past several weeks. The spat pushed Hong Kong's benchmark index to a nine-month low last week.

51 Credit Card, a Chinese online credit management company, raised HK$1bn ($127 million) from a Hong Kong IPO after pricing it at the bottom of an indicative price range, publication IFR reported on Monday.

Asked at the listing ceremony on Monday if the low pricing of Xiaomi and some other tech firms will weigh on upcoming IPOs, Hong Kong said it was not up to the exchange to have a view: "The market is always open. It's open to everybody...If you don't like the price, you can stay away."

VALUATION

Xiaomi's IPO valued the firm, which also makes and gadgets, at $54 billion, almost half the $100 billion it had initially hoped for and below its more recent target of at least $70 billion.

At Monday's closing price the company had a market value of $53.3 billion.

Xiaomi's IPO had been expected to raise up to $10 billion, split between a Hong Kong and a mainland offering, which was postponed last month in a surprise move.

The HK$17 price valued the company at 39.6 times its forecast 2018 earnings, while maker is trading at 16 times and Chinese and gaming giant at 36.

Mo Jia, a Shanghai-based with industry consultancy Canalys, said the weak debut was to be expected.

"The market environment is getting conservative. Most recent floats in Hong Kong dropped below IPO prices. Xiaomi's self-positioning as an company also needs some convincing," he added.

While the company makes more than 90 percent of its revenues from selling and other devices - through which it offers online services - it has pushed to be viewed as an company. Such firms tend to carry far higher valuations than device makers.

"We are an firm," Xiaomi's told the listing ceremony at the Hong Kong stock exchange.

"From day one, we've set up a dual-class share structure. Without the innovation of Hong Kong's capital markets, we wouldn't get a chance to go public in Hong Kong," he said.

Xiaomi's float was the first under the city's new rules allowing firms to weight voting rights in favour of company founders, as part of efforts to encourage more to choose Hong Kong over New York, its arch-rival.

Xiaomi sold 2.18 billion shares in its IPO, 1.4 billion of which were new shares. The deal was led by CLSA, and

The company is now the biggest vendor in and is pushing into European markets including and Russia, though it has lost share in recently to lower-cost rivals.

(Reporting by Julie Zhu; Additional reporting by and Sijia Jiang; Writing by Sumeet Chatterjee; Editing by Muralikumar Anantharaman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, July 09 2018. 15:37 IST
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