Xiaomi shareholders sat on 40 percent loss in first year

July 08, 2019 14:23
Xiaomi shares worth some HK$43 billion are ready to be traded this week, accounting for over 18 percent of its total issued capital. Photo: AFP

The first year of Xiaomi Corp. (01810.HK) as a listed company was far from satisfactory. Its stock has dropped 41.5 percent as of last Friday, two days before its first anniversary.

The Chinese technology giant is not solely to blame for its hardships. In fact, it had a better fortune than mainland peers ZTE Corp. (00763.HK, 000063.CN) and Huawei Technologies, which are currently reeling from US sanctions.

Xiaomi got listed last year with a weighted voting rights structure and topped all IPOs with US$4.72 billion in proceeds.

While its pre-IPO investors such as Morningside Venture Capital, which is owned by the family of property magnate Ronnie Chan Chi-chung, were laughing their way to the bank, many were wondering if they would continue to sell their shares.

Morningside, which had cashed out HK$2.1 billion from the Xiaomi listing, still has 2.71 billion shares available for sale this week. The shares, with a market value of about HK$27 billion, accounted for over 15 percent of the Class B shares.

Excluding chairman Lei Jun, three other Xiaomi founders – Liu De, Hong Feng and Li Wanqiang – will see the one-year lock-up for their shares expire this week. Those shares account for over 25 percent of the B shares totaling HK$16 billion. The three senior vice presidents held 324 million, 674 million and 678 million shares respectively.

In other words, shares worth some HK$43 billion are ready to be traded, accounting for over 18 percent of Xiaomi’s total issued capital.

In January, an unnamed shareholder gained HK$22 billion by selling 231 million shares at between HK$9.28 and HK$9.6 a week after the first six-month lock-up expired. The price was near the record low of HK$8.91 last month.

To hold or not to hold – that is the question for Xiaomi shareholders following the stock's more than 40 percent correction. For those who decide to cash out, some will be luckier than others, depending on their entry price.

But as the stock's performance in the first year shows, it won't be a happy outcome either way.

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EJ Insight writer