Xiaomi’s massive IPO under the new rules of Hong Kong did not do good on debut unexpectedly. Its shares fell 6% for valuation concerns, hitting investor sentiment in the technology sector.
The company priced the IPO at HK$ 17 per share. In the opening deals, the shares went down to HK$ 16. By midnight at GMT, it was down 3% at HK$ 16.48, with the main Hong Kong index trading 1.4% higher.
Xiaomi shares valuation in the IPO pricing was listed as about $54 billion which is almost half its target of $100 billion.
Trading below the issue price suggested that investors still felt the valuation of the stock was relatively high as compared with Tencent and Apple. – Linus Yip, chief strategist at First Shanghai Securities
Xiaomi’s HK$ 17 price is a multiple of 39.6 times of its 2018 earnings, with Apple trading at 16 times and Tencent at 36 times.
This comes amid the US-China trade dispute and Hong Kong’s stock market itself going through a nine-month low in the last week.
Xiaomi targeted upping investor sentiments via this IPO and the offering of the platform Meituan Dianping that covers online food delivery and ticketing services.
Hong Kong stock exchange chief executive Charles Li said on how low pricing of Xiaomi and other tech firms will affect the IPOs under new rules: “We cannot put a brake. The market is always open. It’s open to everybody…If you don’t like the price, you can stay away.”