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Shares of Chinese smartphone maker Xiaomi opened for trade down more than 2 percent on their debut in Hong Kong on Monday, following a disappointing pricing and a listing delay in mainland China.
Xiaomi shares opened down at 16.60 Hong Kong dollars ($2.12) a share, according to Dow Jones, below the initial public offering price of HK$17 ($2.17). Shares traded at HK$16.66 apiece as of 11:05 a.m. HK/SIN.
The company had earlier set a range of HK$17 to HK$22 for the approximately 2.18 billion shares on offer, eventually pricing its IPO at the low-end of an indicative range on Friday. Following the deduction of fees and expenses, Xiaomi said it raised around HK$23.97 billion ($3.05 billion).
The broader Hang Seng Index, meanwhile, was up 1.53 percent during Asia morning trade.
The Chinese company, established only in 2010, is now the world’s fourth-largest smartphone manufacturer by producing low-priced devices that have drawn comparisons — favorable and accusatory — to the iPhone.
"I think short-term stock price is mostly dictated by market conditions. What we will be doing is to focus on the long-term growth of our business," Xiaomi President and Co-Founder Lin Bin told CNBC's Emily Tan on Monday.
AFP | Getty Images
A person walks past the logo of Xiaomi while looking at a smartphone in Hangzhou in China's eastern Zhejiang province on July 9, 2018. Xiaomi shares opened below their IPO price on Monday.
Analysts earlier cited a range of factors for the relatively weak pricing, such as the Chinese CDR delay and recent negative investor sentiment toward global equities, including recent stock market downturns in China and Hong Kong, amid trade war fears between the United States and China.
Lin told CNBC that the impact of the trade fight between the world's two largest economies wasn't a huge concern in the short term as Xiaomi had not done much business in the U.S.
Analysts, however, have said the market might have concluded that Xiaomi has been overhyped.
"No matter how you look at it, it's too expensive for me," said Francis Lun, chief executive officer at brokerage GEO Securities, drawing comparisons between the price-to-earnings ratio of Xiaomi and Apple.
“Honestly, Xiaomi is not an internet company,” said Dickie Wong, executive director for research at Kingston Financial in Hong Kong. “It’s just a hardware company,” he said. “That’s the problem.”
But Lin suggested that the kind of company Xiaomi was being categorized as was of little importance: "I don't know how to call us. Make a name for us, we'll be happy to accept anything."
Lei Jun, Xiaomi’s founder, chairman and CEO, in an open letter included in the IPO prospectus released last month, said Xiaomi sought to be the “coolest” and manufacture “amazing products,” calling it an “innovation-driven internet company.”
And while its phones have received positive reviews and its “Internet of Things” platform of more than 100 million connected devices is popular, Xiaomi’s business is largely driven by its home market and fast growth in India.
The company does not sell phones in the U.S., but its head of international business, Wang Xiang, has said that may change.
Focusing on other markets, however, means the company has avoided the ire of the US government, which has taken a stern attitude on national security and sanctions grounds toward Chinese companies, including Xiaomi rivals Huawei and ZTE.
Analysts say Xiaomi’s future rests on diversification. Lei has publicly vowed that net profit margin in its mainstay hardware will never exceed 5 percent, a bold promise that means new revenue streams are necessary for the company to grow.
And while analysts still expect Xiaomi to eventually offer CDRs, they are divided on when that will happen. Some see it as early as the next few months and others project it won’t start until next year.
Xiaomi's Lin didn't give additional details about when that may happen.
"We decided to postpone the CDR just to ensure the success of the CDR with a very graceful, mutual agreement with CSRC (China Securities Regulatory Commission). So we will be revisiting CDR at a proper time in the future," he said.
