The biggest IPO since 2014 is coming your way; Xiaomi looks to raise at least $10 billion
The world has not seen an IPO of this magnitude since 2014. Back then, Alibaba listed for $25 billion on New York Stock Exchange. Now it is the turning of another Chinese company, Xiaomi, to have its own 15 minutes of fame. Chinese tech giant Xiaomi has, on 3 May, filed to go public in Hong Kong.
Xiaomi, the world's fourth-largest smartphone maker, has become the first company to use Hong Kong's new rules - companies can now go public with different share classes - and according to Bloomberg, is looking to raise "at least $10 billion".
Founded in 2010, Xiaomi shot to fame in China and India thanks to selling most of its smartphones online and at wafer-thin profit margins.
Furthermore, Bloomberg says that Xiaomi may see a valuation "as high as $100 billion". With this filing, comes the first time Xiaomi has shed light on some detailed financials. After a turbulent 2016, Xiaomi posted revenues of 114.6 billion yuan (about $18 billion) in 2017. That constituted a massive 67.5% jump year-over-year. The company did end up with losses of 43.9 billion yuan (about $6.9 billion) in 2017 as compared to a 491.6 million yuan ($77.2 million) profit the year prior.
According to Counterpoint, a market research firm, Xiaomi registered a whopping 134% growth in sales in India. It also leads the market in the second most populous country with 31% share. For Q4 2017, Xiaomi grabbed the top position for smartphone shipments in India and in Q1 2018 was number four globally. CEO Lei Jun has pledged to cap net profit margins for the company's hardware business at a mere 5%.
Shares
There are nine different types of shares. "Xiaomi's shareholding structure is so convoluted that there's NINE different types of shares," tweets Tim Culpan, Bloomberg columnist. There are two types of ordinary shares - Class A and Class B - and seven series of preferred shares - Series A through Series E2.
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— Tim Culpan (@tculpan) May 3, 2018
All those @xiaomi preference shares will be converted to Class B shares
This will further dilute 1/existing Class B shares
Such dilution will enhance Lei Jun and Lin Bin's control
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— Tim Culpan (@tculpan) May 3, 2018
All those @xiaomi preference shares will be converted to Class B shares
This will further dilute 1/existing Class B shares
Such dilution will enhance Lei Jun and Lin Bin's control
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— Tim Culpan (@tculpan) May 3, 2018
One month ago (2 April), Lei Jun was gifted 64 million Class B shares as a reward "for his contributions to our company." They were issued via a Lei Jun-controlled company called Smart Mobile Holdings Ltd.
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— Tim Culpan (@tculpan) May 3, 2018
In addition to controlling 64% of Class A shares (Lin Bin owns 36%), Lei Jun is the single largest owner of Class B shares.
Hong Kong
Getting Xiaomi to file an IPO is a mega win for Hong Kong Exchanges & Clearing Ltd. The rule changes didn't come easy and officials spent over a year lobbying to "scrap a ban on weighted-voting rights, which give founders and executives control even with minority ownership".
The IPO could launch as early as the end of June according to multiple reports.
First published: 3 May 2018, 18:26 IST