Shares of Chinese smartphone maker, Xiaomi, stumbled on their debut in Hong Kong on Monday, opening for trade down more than 2 percent and slipping as much as 5.88 percent during the session. It came following the disappointing pricing and a listing delay in mainland China.
According to Dow Jones, The shares of Xiaomi opened down at 16.60 Hong Kong dollars ($2.12) a share which is below the initial public offering price of HK$17 ($2.17). Shares traded at HK$16.58 apiece as of 3:35 p.m. HK/SIN before closing at $16.80, after slipping as low as HK$16 earlier.
A range of HK$17 to HK$22 for the approximately 2.18 billion shares on offer was set by the company, 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).
Meanwhile, as per the sources, the broader Hang Seng Index rose 1.32 percent to close at 28,688.50.
The Chinese company was established in 2010 and is now the world’s fourth-largest smartphone manufacturer by producing low-priced devices that have drawn comparisons to iPhone.
On Monday, the Xiaomi President and co-founder, Lin Bin, told to CNBC that, “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.
The soggy debut performance of the company hasn’t come as much of a surprise for some analysts.
“The share was priced at a very high valuation multiple, substantially higher than its global peers. Even though Xiaomi remained to be a very good story, I think the market is at a stage where you have to prove yourself first before the market can give you a good valuation,” Hao Hong, head of research at BOCOM International, told CNBC.
“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.
The analysts had 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 also 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 have also said the market might have concluded that Xiaomi has been overhyped
However, 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.”
And while markets still expect Xiaomi to eventually offer CDRs, there’s a split in opinion 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.
However, no confirmed date has been put up by the company yet.