Xiaomi’s weak debut portends trouble for imminent Hong Kong tech listings

Xiaomi’s weak debut portends trouble for imminent Hong Kong tech listings

Xiaomi shares opened down at 16.60 Hong Kong dollars, or about $2.08, according to Dow Jones, compared with their offering price of 17 Hong Kong dollars.

"Investors are skeptical about Xiaomi's growth momentum as the global smartphone market seems to be on a downward slope", said Jacky Zhang, an analyst at BOC International in Shanghai.

Shares lost about 4 percent in early trading but rebounded to end the day 16.80 Hong Kong dollars ($1.98).

Analysts said Hong Kong's technology listings have struggled in the past few months, deflating investor interest, while escalating trade tensions have made it a bad time to launch an IPO.

Chinese smartphone maker Xiaomi saw its share price fall below the offer price on its first full day as a public company.

The weak pricing values the firm, which also makes internet-connected home appliances and gadgets, at about $54 billion, nearly half its original US$100 billion ambition earlier this year.

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But Mo Jia of Canalys said the IPO was a "must-go for them even though the current situation is not positive", as Xiaomi would need the cash for an ongoing global expansion as it looks to broaden its scope outside the saturated Chinese smartphone market. "It's open to everybody.If you don't like the price, you can stay away".

Typically companies are valued on a multiple of profits or sales. Most recent floats in Hong Kong dropped below IPO prices.

The stock price at current levels is nearly identical with the $45 billion valuation that Xiaomi achieved at the end of 2014 and the start of 2015, when the company was at its height.

Xiaomi's debut is seen as a key test of investor sentiment for what is expected to be a packed second-half of the year for Hong Kong IPOs, with offerings including online food delivery-to-ticketing services platform Meituan Dianping.

Xiaomi had a bumpy start to its market debut in Hong Kong on Monday.

Potential investors also struggled to view the company as the internet play it considers itself to be, rather than as a smartphone maker - the lower-margin business that now generates most of its profits, sources said. Goldman Sachs Group Inc., Morgan Stanley and CLSA Ltd. are leading Xiaomi's IPO as joint sponsors.

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