Chinese smartphone company Xiaomi made a disappointing debut in Hong Kong on Monday, after it opened below its IPO price of HK$17. The stock was down over 2% at opening and went on to drop as much as over 5% during the day. The price fell to as much as HK$16 but managed to recover in later hours.
The company had put up around 2.18 billion shares on offer and managed to raise about $4.7 billion, bringing the valuation to $54 billion. Xiaomi’s lackluster performance has been attributed to the stock being priced at too high a valuation multiple. Analysts believe the current market demands more proof in terms of performance to justify a high valuation.
The damp pricing was said to be caused by many reasons including the brewing trade war between the US and China which has impacted stock markets in China and Hong Kong leading to investors being cynical of global stocks in the current environment. Xiaomi has deferred its listing in mainland China and did not provide a clear update as to when it would take place.
Xiaomi, which manufactures low-priced smartphones that have been compared to the iPhone, does not believe it will be meaningfully impacted by the US-China trade war as its business in the US is not that huge. The company holds a good market position in India alongside Samsung and has plans to expand in to more markets in the near future with a focus on long-term growth.
Xiaomi competes with Huawei and Samsung and has plans to move into the US where it will face tough competition from Apple (AAPL). There is an air of uncertainty at present with regards to how the dismal performance of Xiaomi will affect other upcoming players such as Didi Chuxing, Tencent Music and Ant Financial who all have IPO plans.