Xiaomi IPO could top $10 billion and stifle Hong Kong capital market
As the most developed free market adjacent to China, many Chinese tech companies come to Hong Kong to do business and trade shares to take advantage of the mass of capital available, especially to speculative trends and entities in the mainland. But the latest word from sources to Bloomberg say that the money will be harder to get, especially after an IPO from Xiaomi.
A tech manufacturer specializing in smartphones last valued at $45 billion in 2014, the company is expected to raise at least a whopping $10 billion from a shares sale — and even that might not be enough for investors who may oversubscribe on the IPO and force Xiaomi’s underwriting banks to borrow more equity at high interest rates. All of this activity basically means that the market will be less liquid for other more tepid ventures.
Xiaomi generates low margins on its hardware products, but is able to supplement profits by charging fees and running ads on the services it offers which include, according to Bloomberg, “video streaming to online financing.” The company has hinted at very strong metrics and has laid out an ambitious global brand expansion plan, which has potential investors salivating. And unlike competitors Huawei and ZTE, the company has very little if any stake at all in telecommunications — governments have been shying away from networking equipment from Chinese companies, fearing many cybersecurity risks from the Xi regime.