Xiaomi Corp. started taking orders for the world’s biggest initial public offering in nearly two years, sharply curtailing its earlier valuation ambitions as it seeks to raise up to $6.1 billion in Hong Kong.
The Chinese smartphone maker and existing investors are offering 2.18 billion shares at HK$17 to HK$22 apiece, according to terms for the deal obtained by Bloomberg on Thursday. The price range values Beijing-based Xiaomi at $53.9 billion to $69.8 billion, the terms show. That could rise to as much as $70.3 billion if a so-called over-allotment option is exercised.
Top Xiaomi executives were initially pushing for an IPO valuation of as much as $100 billion when they began listing preparations last year, Bloomberg News reported at the time. The tussle over valuation stems partly from mixed messages about what Xiaomi does. While 70 percent of revenue comes from selling smartphones, co-founder Lei Jun insists that Xiaomi’s real goal is to be an internet services company making money off ads and online games.
China Mobile Ltd., the nation’s biggest wireless carrier, and U.S. wireless-chip giant Qualcomm Inc. are among firms that have agreed to buy Xiaomi stock as cornerstone investors. Xiaomi expects to take orders from institutional investors through June 28 and aims to start trading in Hong Kong July 9, according to the terms.
Xiaomi, led by serial entrepreneur Lei Jun, was the first to file for a Hong Kong IPO with a weighted-voting rights structure after the city’s bourse changed its rules in April. The deal could become the world’s biggest first-time share sale since September 2016, when Postal Savings Bank of China Co. raised $7.6 billion in a Hong Kong IPO, data compiled by Bloomberg show.
The IPO price range translates to 22.7 times to 29.3 times Xiaomi’s forecast 2019 earnings, people with knowledge of the matter said. The figures assume that so-called over-allotment option is fully exercised, according to one of the people. The price range values the company at 39.6 times to 51.3 times this year’s estimated profit on that basis, the person said.
A representative for Xiaomi said she couldn’t immediately comment on the valuation multiples.
State-owned conglomerates China Poly Group and China Merchants Group Ltd. are among seven cornerstone investors that have committed to buy about $548 million of stock in the offering, according to the terms. Qualcomm and China Mobile each committed to invest $100 million, the terms show.
Chinese express-delivery firm SF Holding Co. and policy lender China Development Bank Corp.’s private equity arm have also committed to purchase shares in the IPO.
Xiaomi was earlier planning to seek about $10 billion combined from the Hong Kong IPO and a near-simultaneous offering to mainland Chinese investors. It has since delayed its plan to float so-called Chinese depositary receipts in Shanghai, which was part of the government’s long-term goal of getting its biggest technology firms to list locally.
Morningside Group and four Xiaomi co-founders are offering some existing stock in the IPO, according to the terms. CLSA Ltd., Goldman Sachs Group Inc. and Morgan Stanley are leading the deal as joint sponsors.