Li Ka-shing's Xiaomi Flutter Fails to Enthuse Investors
Liao Shumin
/SOURCE : Yicai
Li Ka-shing's Xiaomi Flutter Fails to Enthuse Investors

(Yicai Global) June 26 -- The first day of subscriptions for Xiaomi's upcoming initial public offering in Hong Kong has attracted investments from three of China's most successful business moguls, though the overall reaction from the market was underwhelming.

Li Ka-shing, the billionaire founder of conglomerate CK Hutchison Holdings has agreed to contribute HKD200 million (USD25 million) to the listing, Hong Kong Economic Journal reported, while mainland tech heavyweights Jack Ma and Pony Ma will also buy up shares in the smartphone giant, QQ Finance reported an industry insider as saying.

The Beijing-based firm received a lukewarm response overall from the market on its first day of sign-ups, only securing a subscription margin on HKD4.5 billion, equivalent to 0.9-times oversubscription. The opener marked the coolest response for such a listing since last September. Market insiders suggest that the slow uptake was due to the Hong Kong bourse's weak trading overall on the day as well as recent negative news surrounding the IPO.

Xiaomi hopes to raise up to USD6.1 billion when it floats in around July 9, making it one of the world's biggest IPOs since Alibaba's USD21.8 billion haul back in 2014. It plans to issue just under 2.2 billion shares priced between HKD17 (USD2.17) and HKD22, according to a prospectus update published on June 25.

The run-up to the floatation has not gone as smoothly as hoped. The company had been expected to simultaneously become the first enterprise to take advantage of the China Depositary Receipt pilot, which allows overseas-listed companies to issue shares on the domestic A-share market. However, the company halted the plans on June 19 following consultation with the country's securities regulator.

The handset maker has also come in for criticism from environmental protection groups for not disclosing which of its suppliers had breached pollution laws in its IPO prospectus.

Xiaomi's first-day margin amount was far lower than the HKD100 billion recently obtained by China Literature as well as the HKD20 billion secured by gaming tech firm Razer.

Investors' cold reaction to Xiaomi was due to concerns about the company's overvaluation, said Kenny Wen Kit, wealth management strategist at Everbright Sun Hung Kai. The firm's main business is still hardware product sales and its internet business has not made any obvious profit. Even if famous investors invested in Xiaomi, it cannot persuade retailer investors to invest in it, he added.

Editor: William Clegg

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Keywords: Xiaomi , IPO , Subscription , Li Ka Shing