Xiaomi puts indefinite delay on CDRs in
blow to China's plans for tech listings
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[June 23, 2018]
By Julie Zhu and Sijia Jiang
HONG KONG (Reuters) - Chinese smartphone
maker Xiaomi Corp <IPO-XMGP.HK> said on Saturday there is no time frame
for a mainland share offering, casting doubt on Beijing's efforts to
lure foreign-listed Chinese tech giants back home.
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.
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Xiaomi's Founder, Chairman and CEO Lei Jun attends a news conference
in Hong Kong, China June 23, 2018. REUTERS/Bobby Yip
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.
(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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