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Xiaomi Readies For World’s largest IPO After Alibaba

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Xiaomi, the Chinese smartphone maker and the manufacturer of popular Mi series of smartphones and accessories has filed for an IPO offering in Hong Kong exchange. Accordingly to a Bloomberg report, Xiaomi is expected to raise at least $10 billion, citing people with knowledge of the matter and this could value the company in the range of $100 billion.

It’s interesting to see Xiaomi choosing Hong Kong for it’s IPO instead of New York which is known for big tech IPO’s. The experts feel that access to mainland China which is Xiaomi’s primary market as well as the new rules set by Hong Kong Exchange recently allowing companies to list different share classes came in favour for the IPO choice.

Xiaomi was founded by Lei Jun, who was a serial entrepreneur offering Mi series of phones closely matching the specs of high-end smartphones, however pricing them only at a fraction of what the high-end smartphones cost.

If the IPO goes through successfully, this would be the largest IPO after the Alibaba Group offering in 2014 where it had raised $25 billion.

As a part of the filing, the CEO and Chairman of Xiaomi, Lei Jun published an open letter in which he touted Xiaomi as “more than a hardware company”, and added, “We are an innovation-driven internet company”.

The letter stated, Xiaomi is the world’s fourth-largest smartphone company and said the company has rare “fan culture” where the global community of “Mi Fans” actively contribute feedback and feature ideas to product development.

It also stated, Xiaomi holds number one smartphone market share in India and its among the top 5 smartphone companies in 15 other countries.

Xiaomi pledged to all its existing and potential users, that, starting 2018 the hardware businesses overall net profit margin will not exceed 5% per year. If the net margin exceeds 5%, the company will return the excess to its users. This may indicate that company’s hardware business would be just one stream to build its user base and it plans to offer other services where it can make better margins.

CLSA, Goldman Sachs, and Morgan Stanley are the joint sponsors for the IPO.

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