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Xiaomi had been expected to raise up to $10 billion, split
between its Hong Kong and mainland offerings. But in a surprise
move this week, it postponed its mainland share offering until
after it completes its scheduled July 9 listing in Hong Kong.
It did not say when it would restart its China depositary
receipts (CDRs) issuance process or why it was postponing the
mainland offering.
Sources told Reuters the decision was mainly because of a
dispute between the company and Chinese regulators over the
valuation of its CDRs, but the company denied this.
"We've had many rounds of discussions with the regulators and
reached a consensus that to ensure the quality of our CDR
issuance, it's better that we go public in Hong Kong first,"
Xiaomi's chief financial officer, Shou Zi Chew, told a news
conference in Hong Kong.
Xiaomi, which also makes internet-connected devices, awarded its
chief executive and co-founder Lei Jun about $1.5 billion worth
of shares for his contribution to the company, it said in an
updated regulatory filing this week, in one of the largest
one-off share-based corporate bonuses in years.
The $1.5 billion stock, which has been awarded to Lei's holding
entity - Smart Mobile Holdings Ltd - was recorded by Xiaomi as
share-based compensation expenses on April 2, one month before
it filed for its blockbuster Hong Kong IPO.
Xiaomi is the latest high-profile company to lavish its senior
executives with large stock awards ahead of a stock market
flotation in recent years.
Its co-founder and president, Lin Bin, defended the board's
decision on the compensation.
"Many new-economy companies have compensated their chairmen or
CEOs with stocks ahead of the IPOs. Xiaomi isn't the first and
won't be the last to do so," he said at the news conference.
Lin added Xiaomi's board unanimously agreed on the stock award
to Lei, who "completely knew nothing about it".
Chinese e-commerce powerhouse JD.com <JD.O> awarded CEO Richard
Liu stocks worth nearly $900 million at the company's IPO price,
ahead of its New York listing in 2014.
Xiaomi has lined up $548 million from seven cornerstone
investors including U.S. chipmaker Qualcomm Inc <QCOM.O> for its
Hong Kong IPO, Reuters reported on Thursday.
The offering is set to be the first listing under new exchange
rules designed to attract tech floats, as competition heats up
between Hong Kong, New York and the Chinese mainland.
It is selling about 2.18 billion shares at a price range of
HK$17 to HK$22 ($2.17 to $2.80) each, representing a multiple of
22.7–29.3 times 2019 earnings forecast by its underwriting
syndicate.
The IPO values the Beijing-based, Cayman-domiciled company at
$54.3 billion - $70.3 billion after a 15 percent "greenshoe" or
over-allotment option which can be sold if there is demand. If
the greenshoe is exercised, Xiaomi's free float will be 9.99
percent of its enlarged share capital.
The new valuation range is far below the $100 billion touted by
sources this year and below the more recent $70 billion plus
valuation target that some analysts and investors see as
aggressive.
CEO Lei said he expected to expand its product range and
international market presence. Xiaomi’s phones are sold in 74
countries.
"I agree the smartphone market in the next 10 years will grow
slowly. But still, it is a giant market," Lei said.
Set up in 2010, the company doubled its smartphone shipments in
2017 to become the world's fourth-largest maker, according to
Counterpoint Research, defying a global slowdown in smartphone
sales.
Xiaomi also makes dozens of internet-connected home appliances
and gadgets, including scooters, air purifiers and rice cookers.
(This version of the story corrects Xiaomi's scheduled listing
date is July 9, not July 7, in paragraph 2)
(Reporting by Julie Zhu and Sijia Jiang in Hong Kong; Additional
reporting by Fiona Lau of IFR; Editing by Anne Marie Roantree
and Stephen Coates)
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