Date
16 October 2018
Xiaomi has prepared for listing for years and is in a good position to become the first CDR issuance entity. Photo: Sina
Xiaomi has prepared for listing for years and is in a good position to become the first CDR issuance entity. Photo: Sina

Why Xiaomi may find it useful to launch CDRs ahead of HK IPO

Chinese smartphone maker Xiaomi Corp submitted its IPO application in Hong Kong in early May. It was widely expected that the company will list in late June at the earliest and become the first Hong Kong-listed company with dual-share class structure.

But all of a sudden, the iconic IPO is rumored to be postponed to at least until July 17 to give way to Xiaomi’s CDR issuance in mainland China.

Xiaomi will issue CDR on the Shanghai exchange on July 16, Sina reported, citing sources from the nation’s top securities regulator.

As such, Xiaomi will push back its Hong Kong IPO by one to two weeks, the report said.

Though unconfirmed yet, it makes perfect sense if Xiaomi decides to launch its CDR first.

Chinese authorities put forward the CDR scheme early this year to lure new-economy firms to list at home.

“China has failed to enjoy the fruit of their growth, and it’s a pity. We should not let that happen again,” Liu Shiyu, chairman of the China Securities Regulatory Commission, has said previously, indicating how CDR is regarded as a top priority for Beijing.

Most new-economy firms would see CDRs issuance as a way to pledge their loyalty to the nation.

Xiaomi has prepared for listing for years and is in a good position to become the first CDR entity, ahead of other unicorns like Ant Financial, Didi, Jinri Toutiao, etc.

The smart-device maker would therefore likely want to grab this rare opportunity.

Not only are there preferential treatments from CSRC, given the vast number of Xiaomi fans in China, its CDR would be in great demand.

It’s worth noting that several new-economy firms including Yixin Group (02858.HK), Razer (01337.HK) and Ping An Good Doctor (01833.HK) are struggling with weak prices after listing. Ping An Good Doctor even fell below the initial offer price on the listing day.

It shows that the hype cycle of new-economy stocks is fading in Hong Kong market.

With a net profit of around 5 billion yuan last year, it wouldn’t be easy for Xiaomi to get the targeted US$100 billion valuation in this sort of market environment.

Now if Xiaomi lists on the domestic market through the CDR channel first, there is a good chance A share investors may ramp the share price higher to support a more aggressive valuation for Xiaomi’s Hong Kong IPO.

This article appeared in the Hong Kong Economic Journal on June 1

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]

RC

Hong Kong Economic Journal columnist

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