Huge impact: Xiaomi goes for IPO on HK exchange

Chinese tech giant Xiaomi has become the first company to apply for a dual-class shareholding structure on the Hong Kong Stock Exchange. The IPO application was filed on May 3, soon after the HKSE opened to them on April 30.

Headquartered in Beijing, the company profits primarily from smartphones but is diversifying. A large portion of management and services are conducted in the Zhuhai Hi-Tech Industrial Development Zone.

Xiaomi used the revised main board listing rules to initiate the initial public offering. Biopharmaceutical companies and other new-economy firms are also allowed to apply for listing on the stock exchange now, according to new rules.

Its role as an internet company underpinned by smartphones and intelligent hardware connected by the Internet of Things (IoT) was emphasized by Lei Jun, chairman and founder of Xiaomi. This new position was found to be more in line with HKSE's positive attitude toward high-tech companies driven by innovation.

Mi Home Experience Store at Causeway Bay, Hong Kong [Photo courtesy Xinhua News Agency]

Now the fourth-largest smartphone manufacturer in the world, Xiaomi earned 114.6 billion yuan ($18 billion) in revenue last year, rocketing 67.5 percent year-on-year, according to the application file. It was a staggering increase from 6.84 billion yuan ($1.1 billion) in 2016 and 6.68 billion yuan ($1.1 billion) in 2015.

The company is seeking to raise $10 billion and will be valued at $100 billion. Key sponsors for Xiaomi's Hong Kong IPO are CITIC Securities, Morgan Stanley, and Goldman Sachs.

Market insiders predict that it could be the biggest IPO this year, and one of the largest since Alibaba in New York in 2014.

The company stated that 30 percent of the proceeds received from the IPO will go toward the research and development of core products. These include smartphones, laptops, smart TVs, AI speaker, and smart routers. Another 30 percent will be used to expand the industrial chain for IoT, consumer goods, and mobile internet service including artificial intelligence (AI). Global expansion will be allocated approximately 30 percent as well.

Industry analysts believe that Xiaomi's listing in the stock exchange will usher in a new era of prosperity for Hong Kong's capital market. Now, diversified investment will flow in with an influx of new economic enterprises following the tech giant.